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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Red Star Macalline Group Corporation Ltd. (HKG:1528) share price slid 16% over twelve months. That contrasts poorly with the market return of -0.4%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 14% in three years. It's down 1.2% in the last seven days.
Check out our latest analysis for Red Star Macalline Group
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately Red Star Macalline Group reported an EPS drop of 19% for the last year. We note that the 16% share price drop is very close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Red Star Macalline Group'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. 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. We note that for Red Star Macalline Group the TSR over the last year was -12%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Red Star Macalline Group shareholders are down 12% for the year (even including dividends) , falling short of the market return. The market shed around 0.4%, no doubt weighing on the stock price. The three-year loss of 0.2% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before forming an opinion on Red Star Macalline Group you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.