Shin Kong Financial Holding (TPE:2888) Shareholders Booked A 33% Gain In The Last Five Years

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market But Shin Kong Financial Holding Co., Ltd. (TPE:2888) has fallen short of that second goal, with a share price rise of 33% over five years, which is below the market return. The last year has been disappointing, with the stock price down 17% in that time.

Check out our latest analysis for Shin Kong Financial Holding

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Shin Kong Financial Holding achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 6% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.39.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Shin Kong Financial Holding has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Shin Kong Financial Holding the TSR over the last 5 years was 50%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Shin Kong Financial Holding had a tough year, with a total loss of 13% (including dividends), against a market gain of about 38%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Shin Kong Financial Holding (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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