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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. Investors in Goldlion Holdings Limited (HKG:533) have tasted that bitter downside in the last year, as the share price dropped 22%. That falls noticeably short of the market return of around -7.2%. Looking at the longer term, the stock is down 18% over three years. The falls have accelerated recently, with the share price down 15% in the last three months. Of course, this share price action may well have been influenced by the 7.8% decline in the broader market, throughout the period.
View our latest analysis for Goldlion Holdings
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Even though the Goldlion Holdings share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.
We don't see any weakness in the Goldlion Holdings's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Goldlion Holdings's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Goldlion Holdings's TSR for the last year was -17%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!