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Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example, after five long years the Embry Holdings Limited (HKG:1388) share price is a whole 62% lower. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 40%. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.
Check out our latest analysis for Embry Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Looking back five years, both Embry Holdings's share price and EPS declined; the latter at a rate of 13% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 18% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 6.07 further reflects this reticence.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Embry Holdings's key metrics by checking this interactive graph of Embry Holdings's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Embry Holdings's TSR for the last 5 years was -55%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 2.0% in the last year, Embry Holdings shareholders lost 38% (even including dividends) . Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 15% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before forming an opinion on Embry Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.