Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Lung Kee (Bermuda) Holdings Limited (HKG:255) share price slid 25% over twelve months. That contrasts poorly with the market return of -2.4%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 2.2% in three years. It's down 1.1% in the last seven days.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Unfortunately Lung Kee (Bermuda) Holdings reported an EPS drop of 53% for the last year. This fall in the EPS is significantly worse than the 25% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Lung Kee (Bermuda) Holdings's key metrics by checking this interactive graph of Lung Kee (Bermuda) Holdings's 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. 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. We note that for Lung Kee (Bermuda) Holdings the TSR over the last year was -18%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 2.4% in the twelve months, Lung Kee (Bermuda) Holdings shareholders did even worse, losing 18% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 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.
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