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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Investors in Sino-Ocean Group Holding Limited (HKG:3377) have tasted that bitter downside in the last year, as the share price dropped 38%. That contrasts poorly with the market return of -8.6%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 6.9% in three years. On top of that, the share price has dropped a further 9.4% in a month.
See our latest analysis for Sino-Ocean Group Holding
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unfortunately Sino-Ocean Group Holding reported an EPS drop of 5.9% for the last year. The share price decline of 38% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 4.72.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Sino-Ocean Group Holding’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Sino-Ocean Group Holding, it has a TSR of -33% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 8.6% in the twelve months, Sino-Ocean Group Holding shareholders did even worse, losing 33% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 3.4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on Sino-Ocean Group Holding it might be wise to click here to see if insiders have been buying or selling shares.