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Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Sundart Holdings Limited (HKG:1568) shareholders have had that experience, with the share price dropping 16% in three years, versus a market return of about 26%. It's down 1.3% in the last seven days.
See our latest analysis for Sundart 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. 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.
Sundart Holdings saw its EPS decline at a compound rate of 17% per year, over the last three years. In comparison the 5.6% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Sundart Holdings the TSR over the last 3 years was -12%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Over the last year, Sundart Holdings shareholders took a loss of 12% , including dividends . In contrast the market gained about 5.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 4.1% 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. Before forming an opinion on Sundart Holdings you might want to consider these 3 valuation metrics.