We’re definitely into long term investing, but some companies are simply bad investments over any time frame. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Midland Holdings Limited (HKG:1200) during the five years that saw its share price drop a whopping 74%. And some of the more recent buyers are probably worried, too, with the stock falling 59% in the last year. Furthermore, it’s down 17% in about a quarter. That’s not much fun for holders. But this could be related to the weak market, which is down 12% in the same period.
Since Midland Holdings has shed HK$50m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
See our latest analysis for Midland Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over five years Midland Holdings’ earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it’s hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Midland Holdings’ total shareholder return (TSR) and its 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. Midland Holdings’ TSR of was a loss of 70% for the 5 years. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market lost about 23% in the twelve months, Midland Holdings shareholders did even worse, losing 59%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Midland Holdings better, we need to consider many other factors. Take risks, for example – Midland Holdings has 1 warning sign we think you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Discounted cash flow calculation for every stock
Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.
