Pulling back 12% this week, Ocean One Holding's HKG:9876) three-year decline in earnings may be coming into investors focus

Ocean One Holding Ltd. (HKG:9876) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't displace its brilliant performance over three years. Over that time, we've been excited to watch the share price climb an impressive 413%. As long term investors the recent fall doesn't detract all that much from the longer term story. Only time will tell if there is still too much optimism currently reflected in the share price.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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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.

Over the last three years, Ocean One Holding failed to grow earnings per share, which fell 4.4% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Ocean One Holding at the moment. So other metrics may hold the key to understanding what is influencing investors.

Languishing at just 1.2%, we doubt the dividend is doing much to prop up the share price. The revenue drop of 5.6% is as underwhelming as some politicians. What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Ocean One Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Ocean One Holding, it has a TSR of 455% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Ocean One Holding shareholders have received returns of 33% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 36% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Ocean One Holding a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Ocean One Holding better, we need to consider many other factors. Take risks, for example - Ocean One Holding has 1 warning sign we think you should be aware of.

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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.