Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the SmarTone Telecommunications Holdings Limited (HKG:315) share price is a whole 64% lower. We certainly feel for shareholders who bought near the top.
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 the five years over which the share price declined, SmarTone Telecommunications Holdings' earnings per share (EPS) dropped by 16% each year. Notably, the share price has fallen at 18% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into SmarTone Telecommunications Holdings' key metrics by checking this interactive graph of SmarTone Telecommunications Holdings's earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for SmarTone Telecommunications Holdings the TSR over the last 5 years was -53%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
SmarTone Telecommunications Holdings shareholders are up 18% for the year (even including dividends). Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand SmarTone Telecommunications Holdings better, we need to consider many other factors. Take risks, for example - SmarTone Telecommunications Holdings has 1 warning sign we think you should be aware of.
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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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