We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the Legend Holdings Corporation (HKG:3396) share price managed to fall 71% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 30%.
On a more encouraging note the company has added HK$401m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
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.
In the last half decade Legend Holdings saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
SEHK:3396 Earnings Per Share Growth May 3rd 2024
Dive deeper into Legend Holdings' key metrics by checking this interactive graph of Legend Holdings's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We've already covered Legend Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Legend Holdings' TSR, which was a 65% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
While the broader market lost about 3.5% in the twelve months, Legend Holdings shareholders did even worse, losing 28%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 Legend Holdings is showing 1 warning sign in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
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オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。