Would Shareholders Who Purchased Far EasTone Telecommunications' (TPE:4904) Stock Three Years Be Happy With The Share price Today?

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 Far EasTone Telecommunications Co., Ltd. (TPE:4904) shareholders have had that experience, with the share price dropping 19% in three years, versus a market return of about 51%.

See our latest analysis for Far EasTone Telecommunications

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Far EasTone Telecommunications saw its EPS decline at a compound rate of 7.3% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 7% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

It might be well worthwhile taking a look at our free report on Far EasTone Telecommunications' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Far EasTone Telecommunications, it has a TSR of -6.0% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Far EasTone Telecommunications shareholders are down 11% for the year (even including dividends), but the market itself is up 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Far EasTone Telecommunications has 4 warning signs (and 3 which are potentially serious) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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