Introducing Super Strong Holdings (HKG:8262), The Stock That Tanked 85%
As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Super Strong Holdings Limited (HKG:8262); the share price is down a whopping 85% in the last three years. That would certainly shake our confidence in the decision to own the stock. It's up 7.7% in the last seven days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
View our latest analysis for Super Strong Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate three years of share price decline, Super Strong Holdings actually saw its earnings per share (EPS) improve by 39% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 9.6% each year, over three years. In that case, the current EPS might be viewed by some as difficult to sustain.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Super Strong Holdings's TSR for the last 3 years was -83%, 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
Super Strong Holdings shareholders are down 2.6% for the year (even including dividends) , but the broader market is up 3.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 44% per annum loss investors have suffered over the last three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. Before forming an opinion on Super Strong Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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. Thank you for reading.
