Plover Bay Technologies' (HKG:1523) Shareholders Are Down 42% On Their Shares

Many investors define successful investing as beating the market average over the long term. 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 Plover Bay Technologies Limited (HKG:1523) shareholders, since the share price is down 42% in the last three years, falling well short of the market decline of around 1.7%. It's down 1.1% in the last seven days.

See our latest analysis for Plover Bay Technologies

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Although the share price is down over three years, Plover Bay Technologies actually managed to grow EPS by 18% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Plover Bay Technologies has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Plover Bay Technologies' TSR for the last 3 years was -28%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The last twelve months weren't great for Plover Bay Technologies shares, which cost holders 11%, including dividends, while the market was up about 7.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 9% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Plover Bay Technologies better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Plover Bay Technologies you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course Plover Bay Technologies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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