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Hang Lung Group (HKG:10) Sheds HK$1.1b, Company Earnings and Investor Returns Have Been Trending Downwards for Past Five Years

Simply Wall St ·  12/21/2022 08:15

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Hang Lung Group Limited (HKG:10), since the last five years saw the share price fall 52%. On top of that, the share price is down 5.5% in the last week.

After losing 5.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Hang Lung Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Looking back five years, both Hang Lung Group's share price and EPS declined; the latter at a rate of 10% per year. This reduction in EPS is less than the 14% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 7.40 further reflects this reticence.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growthSEHK:10 Earnings Per Share Growth December 21st 2022

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Hang Lung Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Hang Lung Group's TSR for the last 5 years was -40%, 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

While it's never nice to take a loss, Hang Lung Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 9.7% wasn't as bad as the market loss of around 12%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 7% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. Case in point: We've spotted 2 warning signs for Hang Lung Group you should be aware of, and 1 of them is a bit unpleasant.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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