The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term New Century Group Hong Kong Limited (HKG:234) shareholders for doubting their decision to hold, with the stock down 20% over a half decade. Furthermore, it's down 12% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 8.4% in the same timeframe.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 New Century Group Hong Kong's share price and EPS declined; the latter at a rate of 7.2% per year. The share price decline of 4.3% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into New Century Group Hong Kong's key metrics by checking this interactive graph of New Century Group Hong Kong's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between New Century Group Hong Kong's total shareholder return (TSR) and its 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. New Century Group Hong Kong's TSR of was a loss of 13% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While it's never nice to take a loss, New Century Group Hong Kong shareholders can take comfort that their trailing twelve month loss of 12% wasn't as bad as the market loss of around 14%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 2.8% 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'. If you would like to research New Century Group Hong Kong in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like New Century Group Hong Kong better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 firstname.lastname@example.org. 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.