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. So we wouldn't blame long term Shenzhen International Holdings Limited (HKG:152) shareholders for doubting their decision to hold, with the stock down 61% over a half decade. And the share price decline continued over the last week, dropping some 5.0%.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the five years over which the share price declined, Shenzhen International Holdings' earnings per share (EPS) dropped by 29% each year. The share price decline of 17% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. It might be well worthwhile taking a look at our free report on Shenzhen International Holdings' earnings, revenue and cash flow.
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. We note that for Shenzhen International Holdings the TSR over the last 5 years was -44%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's certainly disappointing to see that Shenzhen International Holdings shares lost 10% throughout the year, that wasn't as bad as the market loss of 13%. Of far more concern is the 8% p.a. loss served to shareholders over the last five years. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand Shenzhen International Holdings better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Shenzhen International Holdings (including 1 which shouldn't be ignored) .
Shenzhen International Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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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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.