Telecom Digital Holdings' (HKG:6033) earnings trajectory could turn positive as the stock surges 13% this past week

Telecom Digital Holdings Limited (HKG:6033) shareholders should be happy to see the share price up 13% in the last week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 57% in that half decade.

While the last five years has been tough for Telecom Digital Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for Telecom Digital Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Telecom Digital Holdings' earnings per share (EPS) dropped by 10% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 15% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 6.04 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Telecom Digital Holdings' key metrics by checking this interactive graph of Telecom Digital Holdings's earnings, revenue and cash flow.

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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Telecom Digital Holdings the TSR over the last 5 years was -39%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Telecom Digital Holdings shareholders are down 47% for the year (even including dividends), but the market itself is up 5.4%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Telecom Digital Holdings is showing 5 warning signs in our investment analysis , and 1 of those is potentially serious...

We will like Telecom Digital Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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

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.