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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of SH Group (Holdings) Limited (HKG:1637) have had an unfortunate run in the last three years. Unfortunately, they have held through a 65% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 42% in the last year. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.
View our latest analysis for SH Group (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).
Although the share price is down over three years, SH Group (Holdings) actually managed to grow EPS by 19% per year in that time. 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.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on SH Group (Holdings)'s balance sheet strength is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for SH Group (Holdings) the TSR over the last 3 years was -63%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
SH Group (Holdings) shareholders are down 40% for the year (even including dividends) , falling short of the market return. Meanwhile, the broader market slid about 14%, likely weighing on the stock. Shareholders have lost 28% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 4 warning signs for SH Group (Holdings) (1 can't be ignored) that you should be aware of.