SMIT Holdings'(HKG:2239) Share Price Is Down 25% Over The Past Three Years.

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term SMIT Holdings Limited (HKG:2239) shareholders have had that experience, with the share price dropping 25% in three years, versus a market decline of about 3.0%. And more recent buyers are having a tough time too, with a drop of 22% in the last year. In the last ninety days we've seen the share price slide 26%.

See our latest analysis for SMIT Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

SMIT Holdings became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

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. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on SMIT Holdings' earnings, revenue and cash flow.

A Different Perspective

The last twelve months weren't great for SMIT Holdings shares, which cost holders 22%, including dividends, while the market was up about 11%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 8% 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. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Take risks, for example - SMIT Holdings has 2 warning signs we think you should be aware of.

SMIT Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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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