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Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Luk Fook Holdings (International) Limited (HKG:590) have tasted that bitter downside in the last year, as the share price dropped 19%. That's disappointing when you consider the market returned 1.3%. At least the damage isn't so bad if you look at the last three years, since the stock is down 6.4% in that time. On top of that, the share price is down 6.2% in the last week. However, this move may have been influenced by the broader market, which fell 4.6% in that time.
Check out our latest analysis for Luk Fook Holdings (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...' 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.
Even though the Luk Fook Holdings (International) share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.
We don't see any weakness in the Luk Fook Holdings (International)'s dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Luk Fook Holdings (International) stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Luk Fook Holdings (International) the TSR over the last year was -14%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.