We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held CIFI Holdings (Group) Co. Ltd. (HKG:884) shares for the last five years, while they gained 331%. This just goes to show the value creation that some businesses can achieve. It's also up 17% in about a month.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, CIFI Holdings (Group) achieved compound earnings per share (EPS) growth of 22% per year. This EPS growth is lower than the 34% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on CIFI Holdings (Group)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for CIFI Holdings (Group) the TSR over the last 5 years was 489%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
CIFI Holdings (Group)'s TSR for the year was broadly in line with the market average, at 25%. We should note here that the five-year TSR is more impressive, at 43% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes CIFI Holdings (Group) a stock worth watching. 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. For instance, we've identified 3 warning signs for CIFI Holdings (Group) (1 shouldn't be ignored) that you should be aware of.
CIFI Holdings (Group) is not the only stock that insiders are buying. 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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