Telecom Digital Holdings (HKG:6033) Shareholders Received A Total Return Of Negative 9.1% In The Last Three Years

As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Telecom Digital Holdings Limited (HKG:6033) shareholders, since the share price is down 30% in the last three years, falling well short of the market decline of around 0.1%. There was little comfort for shareholders in the last week as the price declined a further 2.6%.

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate three years of share price decline, Telecom Digital Holdings actually saw its earnings per share (EPS) improve by 0.5% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It looks to us like the market was probably too optimistic around growth three years ago. However, taking a look at other business metrics might shed a bit more light on the share price action.

It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. The revenue decline, at an annual rate of 6.3% over three years, might be considered salt in the wound.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Telecom Digital Holdings' 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 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, Telecom Digital Holdings' TSR for the last 3 years was -9.1%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 8.0% in the last year, Telecom Digital Holdings shareholders lost 4.6% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 1 warning sign for Telecom Digital Holdings that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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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