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Investors in BOC Hong Kong (Holdings) (HKG:2388) have seen decent returns of 73% over the past year
The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the BOC Hong Kong (Holdings) Limited (HKG:2388) share price is up 62% in the last 1 year, clearly besting the market return of around 29% (not including dividends). That's a solid performance by our standards! It is also impressive that the stock is up 46% over three years, adding to the sense that it is a real winner.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
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.
BOC Hong Kong (Holdings) was able to grow EPS by 13% in the last twelve months. This EPS growth is significantly lower than the 62% 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that BOC Hong Kong (Holdings) has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, BOC Hong Kong (Holdings)'s TSR for the last 1 year was 73%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that BOC Hong Kong (Holdings) shareholders have received a total shareholder return of 73% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - BOC Hong Kong (Holdings) has 1 warning sign we think you should be aware of.
Of course BOC Hong Kong (Holdings) may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.