Optimism around New Media Lab (HKG:1284) delivering new earnings growth may be shrinking as stock declines 14% this past week

While it may not be enough for some shareholders, we think it is good to see the New Media Lab Limited (HKG:1284) share price up 14% in a single quarter. But in truth the last year hasn't been good for the share price. After all, the share price is down 18% in the last year, significantly under-performing the market.

Since New Media Lab has shed HK$33m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, New Media Lab had to report a 33% decline in EPS over the last year. The share price fall of 18% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on New Media Lab's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of New Media Lab, it has a TSR of -6.7% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Given that the market gained 32% in the last year, New Media Lab shareholders might be miffed that they lost 6.7% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 14% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for New Media Lab (2 don't sit too well with us!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.