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Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Haw Par Corporation Limited (SGX:H02) shareholders, since the share price is down 30% in the last three years, falling well short of the market decline of around 4.0%. And the ride hasn't got any smoother in recent times over the last year, with the price 26% lower in that time. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 6.5% decline in the broader market, throughout the period.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Haw Par
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Haw Par saw its EPS decline at a compound rate of 11% per year, over the last three years. So do you think it's a coincidence that the share price has dropped 11% per year, a very similar rate to the EPS? We don't. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Haw Par's key metrics by checking this interactive graph of Haw Par's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Haw Par the TSR over the last 3 years was -24%, 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
We regret to report that Haw Par shareholders are down 24% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.7%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.5% per year over five years. We realise that Baron Rothschild 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 business. 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 example, we've discovered 2 warning signs for Haw Par (1 is significant!) that you should be aware of before investing here.