The FriendTimes (HKG:6820) Share Price Has Gained 102%, So Why Not Pay It Some Attention?

While FriendTimes Inc. (HKG:6820) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. On the other hand, over the last twelve months the stock has delivered rather impressive returns. During that period, the share price soared a full 102%. So it may be that the share price is simply cooling off after a strong rise. More important, going forward, is how the business itself is going.

Check out our latest analysis for FriendTimes

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. 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.

Over the last twelve months, FriendTimes actually shrank its EPS by 4.5%.

Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We haven't seen FriendTimes increase dividend payments yet, so the yield probably hasn't helped drive the share higher. Rather, we'd posit that the revenue increase of 21% might be more meaningful. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. This free report showing analyst forecasts should help you form a view on FriendTimes

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of FriendTimes, it has a TSR of 109% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

FriendTimes shareholders should be happy with the total gain of 109% over the last twelve months, including dividends. Unfortunately the share price is down 21% over the last quarter. Shorter term share price moves often don't signify much about the business itself. 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. Even so, be aware that FriendTimes is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

FriendTimes is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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