Reflecting on Hon Hai Precision Industry's (TPE:2317) Share Price Returns Over The Last Three Years

While not a mind-blowing move, it is good to see that the Hon Hai Precision Industry Co., Ltd. (TPE:2317) share price has gained 13% in the last three months. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 24% in the last three years, significantly under-performing the market.

See our latest analysis for Hon Hai Precision Industry

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 the three years that the share price fell, Hon Hai Precision Industry's earnings per share (EPS) dropped by 8.6% each year. So do you think it's a coincidence that the share price has dropped 9% per year, a very similar rate to the EPS? We don't. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Hon Hai Precision Industry's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Hon Hai Precision Industry's TSR for the last 3 years was -11%, 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

Hon Hai Precision Industry shareholders gained a total return of 2.5% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 4% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Hon Hai Precision Industry better, we need to consider many other factors. Even so, be aware that Hon Hai Precision Industry is showing 2 warning signs in our investment analysis , you should know about...

We will like Hon Hai Precision Industry 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.

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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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