A Look At Hong Kong Ferry (Holdings)'s (HKG:50) Share Price Returns

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Hong Kong Ferry (Holdings) Company Limited (HKG:50) shareholders have had that experience, with the share price dropping 29% in three years, versus a market decline of about 4.2%. It's up 1.4% in the last seven days.

Check out our latest analysis for Hong Kong Ferry (Holdings)

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Hong Kong Ferry (Holdings)'s earnings per share (EPS) dropped by 37% each year. This fall in the EPS is worse than the 11% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hong Kong Ferry (Holdings)'s TSR for the last 3 years was -17%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Hong Kong Ferry (Holdings) shareholders are down 0.6% for the year (even including dividends), but the market itself is up 26%. 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 1.8% 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. 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 - Hong Kong Ferry (Holdings) has 3 warning signs (and 1 which can't be ignored) we think you should know about.

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 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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