Oriental Enterprise Holdings Limited (HKG:18) shareholders should be happy that the share price rose 21% last week. But if you look at the past five years, the returns haven't been great. In fact, the share price is down 46%, which is nowhere near the return you'd get from buying into an index fund.
The recent 21% rally could be a positive sign for the future, so let's take a look at historical fundamentals.
See our latest analysis for Oriental Enterprise Holdings
To paraphrase Benjamin Graham, “In the short run, the market is a voting machine, but in the long run it's a weighing machine.” One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years that the share price was declining, Oriental Enterprise Holdings' earnings per share (EPS) fell by 1.6% per year. Readers should note that the share price fell faster than the EPS during this period, at 12% per year, suggesting that the market was previously too optimistic about the stock.
The chart below depicts how EPS has changed over time (unveil the exact values ​​by clicking on the image).
SEHK:18 Earnings Per Share Growth 24 Jun 2024
SEHK:18 Earnings Per Share Growth 24 Jun 2024This free interactive report on Oriental Enterprise Holdings' earnings, revenue and cash flow is a great starting point, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, as well as dividends, based on the assumption that the dividends are reinvested. As such, for companies that pay large dividends, the TSR will often be a lot higher than the share price return. Coincidentally, Oriental Enterprise Holdings' TSR for the last 5 years was -21%, which exceeds the share price return mentioned above. This is mainly due to dividend payments.
A different perspective
Oriental Enterprise Holdings investors have had a tough year this year. They lost a total of 27% including dividends, while the market rose about 7.3%. But remember that even the best stocks can underperform the market over a 12-month period. Unfortunately, last year's performance capped the last of a bad run, with shareholders facing a total loss of 4% per year over five years. We understand that Baron Rothschild said that investors should “buy when the blood is flowing”, but we caution that investors should first make sure they are buying a high-quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to gain real insight, other information needs to be considered. Let's look at risks, for example. Oriental Enterprise Holdings has 2 warning signs (and 1 which is a bit worrying) that you should be aware of.
If you like buying stocks with management, then you might just love this free list of companies (hint: many of them are flying under the radar, but have attractive valuations).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
Valuation is complicated, but we can help make it simple.
Find out whether Oriental Enterprise Holdings is overvalued or undervalued by checking our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financials and more.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
Valuation is complicated, but we can help make it simple.
Find out whether Oriental Enterprise Holdings is overvalued or undervalued by checking our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financials and more.
View your free analysis
Have something to say about this article? If you have any questions about the content, please contact us directly or email us at editorial-team@simplywallst.com.
