How Much Did Cathay Financial Holding's(TPE:2882) Shareholders Earn From Share Price Movements Over The Last Three Years?

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Cathay Financial Holding Co., Ltd. (TPE:2882) shareholders have had that experience, with the share price dropping 23% in three years, versus a market return of about 40%. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.9%. But this could be related to good market conditions, with stocks up around 6.1% during the period.

See our latest analysis for Cathay Financial Holding

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Cathay Financial Holding actually managed to grow EPS by 7.2% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

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 19% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Cathay Financial Holding further; while we may be missing something on this analysis, there might also be an opportunity.

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

Cathay Financial Holding is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Cathay Financial Holding stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Cathay Financial Holding's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Cathay Financial Holding's TSR, which was a 12% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

Cathay Financial Holding shareholders gained a total return of 3.8% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Case in point: We've spotted 2 warning signs for Cathay Financial Holding you should be aware of, and 1 of them is a bit concerning.

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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