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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 the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Tong Ren Tang Technologies Co. Ltd. (HKG:1666) shareholders, since the share price is down 43% in the last three years, falling well short of the market return of around 18%. And more recent buyers are having a tough time too, with a drop of 28% in the last year. The falls have accelerated recently, with the share price down 15% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
See our latest analysis for Tong Ren Tang Technologies
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 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).
During the unfortunate three years of share price decline, Tong Ren Tang Technologies actually saw its earnings per share (EPS) improve by 1.0% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed. It looks to us like the market was probably too optimistic around growth three years ago. Looking to other metrics might better explain the share price change.
Revenue is actually up 3.2% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Tong Ren Tang Technologies further; while we may be missing something on this analysis, there might also be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts
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. In the case of Tong Ren Tang Technologies, it has a TSR of -40% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!