Those Who Purchased KPa-BM Holdings (HKG:2663) Shares Three Years Ago Have A 65% Loss To Show For It

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of KPa-BM Holdings Limited (HKG:2663) have had an unfortunate run in the last three years. Sadly for them, the share price is down 65% in that time. The more recent news is of little comfort, with the share price down 33% in a year. The falls have accelerated recently, with the share price down 17% in the last three months. But this could be related to the weak market, which is down 15% in the same period.

Check out our latest analysis for KPa-BM Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Although the share price is down over three years, KPa-BM Holdings actually managed to grow EPS by 4.3% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it's possible a look at other metrics will be enlightening.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that KPa-BM Holdings has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, KPa-BM Holdings's TSR for the last 3 years was -60%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

KPa-BM Holdings shareholders are down 28% for the year (even including dividends) , falling short of the market return. The market shed around 18%, no doubt weighing on the stock price. Shareholders have lost 26% 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 Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that KPa-BM Holdings is showing 3 warning signs in our investment analysis , you should know about...

We will like KPa-BM Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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