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It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of In Construction Holdings Limited (HKG:1500), who have seen the share price tank a massive 79% over a three year period. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 41% in a year. The falls have accelerated recently, with the share price down 29% in the last three months.
Check out our latest analysis for In Construction Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
In Construction Holdings saw its EPS decline at a compound rate of 52% per year, over the last three years. This fall in the EPS is worse than the 41% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on In Construction Holdings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between In Construction Holdings's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that In Construction Holdings's TSR, which was a 73% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
In Construction Holdings shareholders are down 41% for the year, but the broader market is up 4.2%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 35% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. 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.