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The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Allan International Holdings Limited (HKG:684) shareholders for doubting their decision to hold, with the stock down 27% over a half decade. It's down 4.3% in the last seven days.
View our latest analysis for Allan International 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. 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.
Looking back five years, both Allan International Holdings's share price and EPS declined; the latter at a rate of 20% per year. This fall in the EPS is worse than the 6.0% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Allan International Holdings's key metrics by checking this interactive graph of Allan International Holdings's earnings, revenue and cash flow.
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 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. As it happens, Allan International Holdings's TSR for the last 5 years was 1.8%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Allan International Holdings shareholders are down 7.9% for the year (even including dividends) , but the market itself is up 5.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Allan International Holdings you might want to consider these 3 valuation metrics.