The Huabao International Holdings (HKG:336) Share Price Is Down 60% So Some Shareholders Are Wishing They Sold
For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term Huabao International Holdings Limited (HKG:336) shareholders for doubting their decision to hold, with the stock down 60% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 29%. Even worse, it's down 14% in about a month, which isn't fun at all. But this could be related to poor market conditions -- stocks are down 11% in the same time.
Check out our latest analysis for Huabao International Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Looking back five years, both Huabao International Holdings's share price and EPS declined; the latter at a rate of 7.3% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 17% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 7.16 further reflects this reticence.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Huabao International Holdings's TSR for the last 5 years was -49%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Huabao International Holdings shareholders are down 21% over twelve months (even including dividends) , which isn't far from the market return of -19%. So last year was actually even worse than the last five years, which cost shareholders 13% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this 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. Even so, be aware that Huabao International Holdings is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
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 HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
