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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 its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Ho Bee Land Limited (SGX:H13) shareholders, since the share price is down 33% in the last three years, falling well short of the market return of around 22%.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Ho Bee Land
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Ho Bee Land has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.
With a rather small yield of just 1.6% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 16% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Ho Bee Land further; while we may be missing something on this analysis, there might also be an opportunity.
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. Even so, future earnings will be far more important to whether current shareholders make money. 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Ho Bee Land's TSR for the last 3 years was -27%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!