We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the HG Metal Manufacturing Limited (SGX:BTG) share price dropped 67% in the last half decade. That's an unpleasant experience for long term holders. More recently, the share price has dropped a further 18% in a month. However, we note the price may have been impacted by the broader market, which is down 23% in the same time period.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
HG Metal Manufacturing became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 1.0% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling HG Metal Manufacturing stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between HG Metal Manufacturing's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. HG Metal Manufacturing's TSR of was a loss of 59% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
The total return of 20% received by HG Metal Manufacturing shareholders over the last year isn't far from the market return of -22%. So last year was actually even worse than the last five years, which cost shareholders 16% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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. For example, we've discovered 3 warning signs for HG Metal Manufacturing that you should be aware of before investing here.
We will like HG Metal Manufacturing better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.
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