SFK Construction Holdings Limited (HKG:1447) shareholders might be concerned after seeing the share price drop 27% in the last month. In contrast the stock has done reasonably well over three years. After all, the stock has performed better than the market (41%) over that time, over which it gained 47%.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
SFK Construction Holdings was able to grow its EPS at 11% per year over three years, sending the share price higher. We note that the 14% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.
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 SFK Construction Holdings's 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). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for SFK Construction Holdings the TSR over the last 3 years was 117%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
SFK Construction Holdings shareholders are down 25% for the year (even including dividends), falling short of the market return. The market shed around 2.6%, no doubt weighing on the stock price. Fortunately the longer term story is brighter, with total returns averaging about 29% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Importantly, we haven't analysed SFK Construction Holdings's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.