Would Shareholders Who Purchased Legend Holdings' (HKG:3396) Stock Three Years Be Happy With The Share price Today?

Legend Holdings Corporation (HKG:3396) shareholders should be happy to see the share price up 11% in the last month. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 60% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.

View our latest analysis for Legend Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Legend Holdings saw its EPS decline at a compound rate of 29% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 26% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has 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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Legend Holdings' TSR for the last 3 years was -57%, 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

Investors in Legend Holdings had a tough year, with a total loss of 32% (including dividends), against a market gain of about 9.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 3 warning signs for Legend Holdings you should be aware of, and 1 of them doesn't sit too well with us.

Legend 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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