Even the best stock pickers will make plenty of bad investments. Anyone who held Hop Fung Group Holdings Limited (HKG:2320) over the last year knows what a loser feels like. To wit the share price is down 64% in that time. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 20% in three years. On top of that, the share price has dropped a further 8.1% in a month. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unhappily, Hop Fung Group Holdings had to report a 78% decline in EPS over the last year. This fall in the EPS is significantly worse than the 64% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Hop Fung Group Holdings’s earnings, revenue and cash flow.
A Dividend Lost
The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last year, Hop Fung Group Holdings generated a TSR of -62%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
While the broader market lost about 1.3% in the twelve months, Hop Fung Group Holdings shareholders did even worse, losing 62%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.