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Pacific Basin Shipping Limited (HKG:2343) shareholders should be happy to see the share price up 13% in the last month. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 65% after a long stretch. So we’re hesitant to put much weight behind the short term increase. We’d err towards caution given the long term under-performance.
View our latest analysis for Pacific Basin Shipping
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Pacific Basin Shipping moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
Arguably, the revenue drop of 3.8% a year for half a decade suggests that the company can’t grow in the long term. This has probably encouraged some shareholders to sell down the stock.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We know that Pacific Basin Shipping has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Pacific Basin Shipping’s financial health with this free report on its balance sheet.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Pacific Basin Shipping’s TSR for the last 5 years was -50%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Pacific Basin Shipping shareholders are down 23% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.4%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.