Reflecting on Modern Land (China)'s (HKG:1107) Share Price Returns Over The Last Five Years

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Modern Land (China) Co., Limited (HKG:1107), since the last five years saw the share price fall 45%.

View our latest analysis for Modern Land (China)

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years over which the share price declined, Modern Land (China)'s earnings per share (EPS) dropped by 4.0% each year. This reduction in EPS is less than the 11% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 3.55.

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

This free interactive report on Modern Land (China)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Modern Land (China) the TSR over the last 5 years was -25%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Modern Land (China) shareholders are down 4.1% for the year (even including dividends), but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 5% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Modern Land (China) (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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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. 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.
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