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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 even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in New World Department Store China Limited (HKG:825), since the last five years saw the share price fall 51%. There was little comfort for shareholders in the last week as the price declined a further 1.3%.
View our latest analysis for New World Department Store China
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.
New World Department Store China became profitable within the last five years. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.
The revenue fall of 2.9% per year for five years is neither good nor terrible. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
If you are thinking of buying or selling New World Department Store China stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between New World Department Store China's total shareholder return (TSR) and its share price change, which we've covered above. 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. New World Department Store China's TSR of was a loss of 48% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
The total return of 15% received by New World Department Store China shareholders over the last year isn't far from the market return of -17%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 12% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. You could get a better understanding of New World Department Store China's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.