Quanzhou Huixin Micro-credit Co., Ltd. (HKG:1577) shareholders might be concerned after seeing the share price drop 15% in the last week. But that doesn't change the fact that the returns over the last year have been pleasing. In that time we've seen the stock easily surpass the market return, with a gain of 69%.
While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
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. 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.
During the last year Quanzhou Huixin Micro-credit grew its earnings per share (EPS) by 41%. This EPS growth is significantly lower than the 69% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Quanzhou Huixin Micro-credit's earnings, revenue and cash flow .
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Quanzhou Huixin Micro-credit's TSR for the last 1 year was 84%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Quanzhou Huixin Micro-credit shareholders have received a total shareholder return of 84% over one year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Quanzhou Huixin Micro-credit (of which 1 is a bit concerning!) you should know about.
Quanzhou Huixin Micro-credit is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.