Should Hutchison Telecommunications Hong Kong Holdings Be Disappointed With Their 16% Profit?

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. But Hutchison Telecommunications Hong Kong Holdings Limited (HKG:215) has fallen short of that second goal, with a share price rise of 16% over five years, which is below the market return. But if you include dividends then the return is market-beating. Over the last twelve months the stock price has risen a very respectable 9.6%.

See our latest analysis for Hutchison Telecommunications Hong Kong Holdings

Because Hutchison Telecommunications Hong Kong Holdings is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t yet make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Hutchison Telecommunications Hong Kong Holdings saw its revenue shrink by 13% per year. The stock is only up 3.0% for each year during the period. That’s pretty decent given the top line decline, and lack of profits. We’d keep an eye on changes in the trend – there may be an opportunity if the company returns to growth.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

SEHK:215 Income Statement, February 28th 2019
SEHK:215 Income Statement, February 28th 2019

Balance sheet strength is crucual. 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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hutchison Telecommunications Hong Kong Holdings’s TSR for the last 5 years was 42%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It’s good to see that Hutchison Telecommunications Hong Kong Holdings has rewarded shareholders with a total shareholder return of 13% in the last twelve months. That’s including the dividend. That’s better than the annualised return of 7.2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. You could get a better understanding of Hutchison Telecommunications Hong Kong Holdings’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.