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While not a mind-blowing move, it is good to see that the Capinfo Company Limited (HKG:1075) share price has gained 24% in the last three months. But if you look at the last five years the returns have not been good. In fact, the share price is down 49%, which falls well short of the return you could get by buying an index fund.
View our latest analysis for Capinfo
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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 five years over which the share price declined, Capinfo’s earnings per share (EPS) dropped by 1.1% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 13% per year, over the period. This implies that the market was previously too optimistic about the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Capinfo’s TSR for the last 5 years was -42%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Capinfo shareholders are down 12% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.4%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Importantly, we haven’t analysed Capinfo’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.