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While it may not be enough for some shareholders, we think it is good to see the Wuling Motors Holdings Limited (HKG:305) share price up 18% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 38% in the last three years, falling well short of the market return.
View our latest analysis for Wuling Motors Holdings
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
Wuling Motors Holdings saw its EPS decline at a compound rate of 11% per year, over the last three years. The share price decline of 15% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.09.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. 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. 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 and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Wuling Motors Holdings the TSR over the last 3 years was -35%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The total return of 16% received by Wuling Motors Holdings shareholders over the last year isn't far from the market return of -15%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 4.2% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.