Optimism for Wang On Group (HKG:1222) has grown this past week, despite one-year decline in earnings

By
Simply Wall St
Published
September 27, 2021
SEHK:1222
Source: Shutterstock

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Wang On Group Limited (HKG:1222) share price is up 28% in the last 1 year, clearly besting the market return of around 9.1% (not including dividends). So that should have shareholders smiling. Zooming out, the stock is actually down 27% in the last three years.

The past week has proven to be lucrative for Wang On Group investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Wang On Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Wang On Group went from making a loss to reporting a profit, in the last year.

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.

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

earnings-per-share-growth
SEHK:1222 Earnings Per Share Growth September 27th 2021

This free interactive report on Wang On Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Wang On Group's TSR for the last 1 year was 34%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Wang On Group has rewarded shareholders with a total shareholder return of 34% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Wang On Group better, we need to consider many other factors. For instance, we've identified 5 warning signs for Wang On Group (2 don't sit too well with us) that you should be aware of.

But note: Wang On Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.

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

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Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.