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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 if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Pak Fah Yeow International Limited (HKG:239) shareholders have had that experience, with the share price dropping 27% in three years, versus a market return of about 28%. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.
Check out our latest analysis for Pak Fah Yeow International
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the unfortunate three years of share price decline, Pak Fah Yeow International actually saw its earnings per share (EPS) improve by 9.3% 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). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. This situation was no doubt compounded by the fact revenue is down 6.3% per year over three years.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Pak Fah Yeow International stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Pak Fah Yeow International the TSR over the last 3 years was -18%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!