If You Had Bought Edvance International Holdings' (HKG:1410) Shares Three Years Ago You Would Be Down 59%

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Edvance International Holdings Limited (HKG:1410) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 59% drop in the share price over that period. The good news is that the stock is up 1.9% in the last week.

View our latest analysis for Edvance International 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 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.

During five years of share price growth, Edvance International Holdings moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

The modest 1.9% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 14% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Edvance International Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Edvance International Holdings stock, you should check out this FREE detailed report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Edvance International Holdings' TSR for the last 3 years was -55%, 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

Edvance International Holdings shareholders are up 14% for the year (even including dividends). Unfortunately this falls short of the market return of around 29%. On the bright side, that's certainly better than the yearly loss of about 16% endured over the last three years, implying that the company is doing better recently. We hope the turnaround in fortunes continues. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Edvance International Holdings you should know about.

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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