It hasn't been the best quarter for FIT Hon Teng Limited (HKG:6088) shareholders, since the share price has fallen 22% in that time. But that doesn't change the fact that the returns over the last year have been pleasing. Looking at the full year, the company has easily bested an index fund by gaining 86%.
While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year FIT Hon Teng grew its earnings per share (EPS) by 125%. This EPS growth is significantly higher than the 86% increase in the share price. Therefore, it seems the market isn't as excited about FIT Hon Teng as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 10.29.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that FIT Hon Teng has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at FIT Hon Teng's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that FIT Hon Teng shareholders have received a total shareholder return of 86% over one year. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for FIT Hon Teng you should be aware of, and 1 of them is a bit unpleasant.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
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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.
