Reflecting on Kung Sing Engineering's (TPE:5521) Share Price Returns Over The Last Three Years

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Kung Sing Engineering Corporation (TPE:5521) shareholders have had that experience, with the share price dropping 44% in three years, versus a market return of about 68%. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days.

View our latest analysis for Kung Sing Engineering

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 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).

Although the share price is down over three years, Kung Sing Engineering actually managed to grow EPS by 166% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 26% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Kung Sing Engineering more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Kung Sing Engineering's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Kung Sing Engineering's total shareholder return (TSR) and its share price change, which we've covered above. 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. Kung Sing Engineering's TSR of was a loss of 41% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Kung Sing Engineering provided a TSR of 14% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 2% 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 Kung Sing Engineering better, we need to consider many other factors. For example, we've discovered 1 warning sign for Kung Sing Engineering that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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