The shareholders of Texwinca Holdings Limited (HKG: 321) will no doubt be very grateful that the share price rose 41% over the last quarter. But that doesn’t change the fact that returns have been disappointing over the past half decade. The share price did not impress anyone and has fallen by a respectable 81% in that time. So we’re not so sure about celebrating the latest boom. This could of course be the beginning of a trend reversal.
While a drop like this is definitely a body blow, money isn’t as important as health and happiness.
To paraphrase Benjamin Graham, in the short term the market is a voting machine, but in the long term it is a Libra. By comparing earnings per share (EPS) and how the stock price has changed over time, we can get a sense of how investor attitudes towards a company have changed over time.
Looking back over five years, Texwinca Holdings’ share price and earnings per share declined. The latter at a rate of 34% per year. The price drop of 28% per year isn’t as bad as the EPS drop. So investors could expect EPS to rebound – or they anticipated the EPS decline beforehand.
The company’s earnings per share (over time) are shown in the figure below (click to see the exact numbers). .
It’s probably worth noting that we’ve seen significant insider buying over the last quarter, which we view as positive. However, we believe that earnings and revenue growth trends are even more important drivers. Before buying or selling any stock, we always recommend doing a close study of the historical growth trends available here. .
It’s important to consider total shareholder return as well as the stock price return for a given stock. The TSR takes into account the value of any spin-off or discounted capital increase, as well as any dividends, based on the assumption that the dividends will be reinvested. The TSR arguably gives a more complete picture of a stock’s return. In the case of Texwinca Holdings, it has had a TSR of -69% over the past 5 years. This exceeds the previously mentioned share price return. The dividends paid by the company have thus increased the total return for shareholders.
Texwinca Holdings shareholders are down 21% (even including dividends) over the year, but the market itself is up 8. 0%. Even good stocks’ stock prices fall sometimes, but we want to see improvements in a company’s fundamentals before we get too interested. Unfortunately, last year’s performance could point to unresolved challenges as it was worse than the 11% annualized loss over the past half a decade. We are aware that Baron Rothschild said investors should « buy when there is blood on the streets, » but we caution that investors should first be sure they are buying a good quality company. While it is worth considering the varying effects of market conditions on the stock price, other factors are even more important. Note, however, that Texwinca Holdings has three warning signs in our investment analysis that you should be aware of. . .
Texwinca Holdings isn’t the only stock insider buying. So take a look at this free list of growing companies with insider buying.
Please note that the market returns reported in this article reflect the market weighted average returns on stocks currently trading on HK exchanges.
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World News – AU – Texwinca Holdings (HKG: 321) shareholders have fallen 81% on their shares
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