Perfect Medical Health Management Limited (HKG:1830) shareholders should be happy to see the share price up 19% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 50% in the last three years, significantly under-performing the market.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
View our latest analysis for Perfect Medical Health Management
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Although the share price is down over three years, Perfect Medical Health Management actually managed to grow EPS by 1.1% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. 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 Perfect Medical Health Management 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.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Perfect Medical Health Management's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Perfect Medical Health Management, it has a TSR of -37% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Perfect Medical Health Management had a tough year, with a total loss of 16% (including dividends), against a market gain of about 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Perfect Medical Health Management better, we need to consider many other factors. For instance, we've identified 1 warning sign for Perfect Medical Health Management that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.