SMIT Holdings' (HKG:2239) Shareholders Are Down 56% On Their Shares

SMIT Holdings Limited (HKG:2239) shareholders will doubtless be very grateful to see the share price up 35% in the last month. But that is small recompense for the exasperating returns over three years. Indeed, the share price is down a tragic 56% in the last three years. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.

See our latest analysis for SMIT Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, SMIT Holdings moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

With a rather small yield of just 0.3% we doubt that the stock's share price is based on its dividend. Arguably the revenue decline of 34% per year has people thinking SMIT Holdings is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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. It might be well worthwhile taking a look at our free report on SMIT Holdings' earnings, revenue and cash flow.

A Different Perspective

SMIT Holdings shareholders are down 7.1% for the year, (even including dividends), but the broader market is up 28%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 16% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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 2 warning signs for SMIT Holdings that you should be aware of.

SMIT Holdings 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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