If You Had Bought Yung Chi Paint & Varnish Mfg.Co.Ltd's (TPE:1726) Shares Three Years Ago You Would Be Down 12%

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Yung Chi Paint & Varnish Mfg.Co.,Ltd (TPE:1726) shareholders have had that experience, with the share price dropping 12% in three years, versus a market return of about 68%. The good news is that the stock is up 1.4% in the last week.

View our latest analysis for Yung Chi Paint & Varnish Mfg.Co.Ltd

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 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).

During the three years that the share price fell, Yung Chi Paint & Varnish Mfg.Co.Ltd's earnings per share (EPS) dropped by 1.3% each year. This reduction in EPS is slower than the 4% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Yung Chi Paint & Varnish Mfg.Co.Ltd's TSR for the last 3 years was 1.7%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Yung Chi Paint & Varnish Mfg.Co.Ltd shareholders gained a total return of 8.1% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. 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 1 warning sign for Yung Chi Paint & Varnish Mfg.Co.Ltd you should be aware of.

We will like Yung Chi Paint & Varnish Mfg.Co.Ltd 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 TW exchanges.

If you decide to trade Yung Chi Paint & Varnish Mfg.Co.Ltd, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.