Strong week for Powerlong Real Estate Holdings (HKG:1238) shareholders doesn't alleviate pain of three-year loss

Powerlong Real Estate Holdings Limited (HKG:1238) shareholders should be happy to see the share price up 13% in the last week. But the last three years have seen a terrible decline. To wit, the share price sky-dived 86% in that time. So it sure is nice to see a bit of an improvement. The thing to think about is whether the business has really turned around. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the stock has risen 13% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for Powerlong Real Estate Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the three years that the share price declined, Powerlong Real Estate Holdings' earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Powerlong Real Estate Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Dividend Lost

It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last 3 years, Powerlong Real Estate Holdings generated a TSR of -84%, 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

We regret to report that Powerlong Real Estate Holdings shareholders are down 62% for the year. Unfortunately, that's worse than the broader market decline of 19%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Powerlong Real Estate Holdings has 2 warning signs we think you should be aware of.

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 Hong Kong exchanges.

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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.