VSTECS Holdings (HKG:856) sheds HK$402m, company earnings and investor returns have been trending downwards for past three years

One simple way to benefit from a rising market is to buy an index fund. In contrast individual stocks will provide a wide range of possible returns, and may fall short. The VSTECS Holdings Limited (HKG:856) is such an example; over three years its share price is down 31% versus a marketdecline of 18%. Even worse, it's down 11% in about a month, which isn't fun at all.

After losing 6.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for VSTECS Holdings

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

VSTECS Holdings saw its EPS decline at a compound rate of 5.3% per year, over the last three years. The share price decline of 12% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 6.73.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that VSTECS Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think VSTECS Holdings will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of VSTECS Holdings, it has a TSR of -21% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that VSTECS Holdings shareholders have received a total shareholder return of 14% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 2 warning signs for VSTECS Holdings (1 is potentially serious) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com