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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Kingworld Medicines Group Limited (HKG:1110), since the last five years saw the share price fall 49%. On top of that, the share price is down 12% in the last week.
View our latest analysis for Kingworld Medicines Group
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 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.
During the five years over which the share price declined, Kingworld Medicines Group's earnings per share (EPS) dropped by 0.7% each year. This reduction in EPS is less than the 13% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 11.26.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Kingworld Medicines Group's key metrics by checking this interactive graph of Kingworld Medicines Group'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. 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, Kingworld Medicines Group's TSR for the last 5 years was -44%, 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
It's good to see that Kingworld Medicines Group has rewarded shareholders with a total shareholder return of 1.6% in the last twelve months. That's including the dividend. That certainly beats the loss of about 11% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Kingworld Medicines Group better, we need to consider many other factors. Be aware that Kingworld Medicines Group is showing 3 warning signs in our investment analysis , and 1 of those is concerning...