Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. That downside risk was realized by Redsun Properties Group Limited (HKG:1996) shareholders over the last year, as the share price declined 20%. That contrasts poorly with the market return of -11%. We wouldn’t rush to judgement on Redsun Properties Group because we don’t have a long term history to look at. Unhappily, the share price slid 3.6% in the last week.
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.
Unhappily, Redsun Properties Group had to report a 9.7% decline in EPS over the last year. This reduction in EPS is not as bad as the 20% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. The P/E ratio of 4.91 also points to the negative market sentiment.
It might be well worthwhile taking a look at our free report on Redsun Properties Group’s earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Redsun Properties Group, it has a TSR of -16% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Redsun Properties Group shareholders are down 16% for the year (even including dividends), even worse than the market loss of 11%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 9.0% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Keeping this in mind, a solid next step might be to take a look at Redsun Properties Group’s dividend track record. This free interactive graph is a great place to start.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.