Although it is likely that shareholders of Hong Kong Technology Venture Company Limited (HKG:1137) are content overall, the stock has not had a great run lately, with a 13% decline in share price over the past three months.
The fact that the returns over the past five years have been pleasing, however, is unaffected by this. It has undoubtedly outperformed the market, with a return of 67%. Despite the impressive long-term returns, we do feel some pity for those who purchased more recently, given the 27% decline over the past year.
Let us examine what impact the company’s fundamentals have had in generating long-term shareholder returns following a strong seven-day performance.
The market is a voting machine in the near term, but a weighing machine in the long run, according to Benjamin Graham. A company’s share price and earnings per share (EPS) interactions can be used to determine how market sentiment has evolved over time.
Hong Kong Technology Venture went from a loss to profitability throughout the course of the five years that the share price increased. That would typically be viewed favorably, so we anticipate an increase in the share price.
Both the share price return and the total shareholder return should be taken into account for any particular stock. The TSR, based on the supposition that dividends are reinvested, includes the value of any spin-offs or discounted capital raisings in addition to any dividends.
Therefore, the TSR is frequently much higher than the share price return for companies that pay generous dividends. In actuality, Hong Kong Technology Venture’s TSR for the previous five years was 70%, exceeding the previously indicated share price return. Thus, the company’s dividend payments have increased total shareholder return.
Against a market gain of around 1.7%, investors in Hong Kong Technology Venture had a difficult year, suffering a total loss of 26% (including dividends). But keep in mind that occasionally, even the strongest equities will perform worse than the market over a full year. On the plus side, long-term investors have profited, with a gain of 11% annually over a five-year period.
The recent sell-off can present an opportunity worth taking into account if the basic facts continue to point to long-term sustainable growth. Looking at share price as a long-term proxy for company performance intrigues me much. But we must also take other data into account in order to truly understand something.
- Published By Team Hongkong Journalist