Shareholders in Wharf (Holdings) (HKG:4) are in the red if they invested three years ago

Investors are understandably disappointed when a stock they own declines in value. But no-one can make money on every call, especially in a declining market. The The Wharf (Holdings) Limited (HKG:4) is down 20% over three years, but the total shareholder return is -16% once you include the dividend. And that total return actually beats the market decline of 17%. Furthermore, it's down 18% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 10% decline in the broader market, throughout the period.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Wharf (Holdings)

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Wharf (Holdings) has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

With a rather small yield of just 2.0% we doubt that the stock's share price is based on its dividend. We think that the revenue decline over three years, at a rate of 12% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in 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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Wharf (Holdings) the TSR over the last 3 years was -16%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Wharf (Holdings) shareholders have received a total shareholder return of 22% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Wharf (Holdings) by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.