Investors in Public Financial Holdings (HKG:626) from three years ago are still down 33%, even after 12% gain this past week

While it may not be enough for some shareholders, we think it is good to see the Public Financial Holdings Limited (HKG:626) share price up 19% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 37% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

While the last three years has been tough for Public Financial Holdings shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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Public Financial Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last three years, Public Financial Holdings' revenue dropped 22% per year. That's definitely a weaker result than most pre-profit companies report. On the face of it we'd posit the share price fall of 11% compound, over three years is well justified by the fundamental deterioration. It would probably be worth asking whether the company can fund itself to profitability. Of course, it is possible for businesses to bounce back from a revenue drop - but we'd want to see that before getting interested.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Public Financial Holdings the TSR over the last 3 years was -33%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Public Financial Holdings shareholders gained a total return of 3.5% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 2% per year, over five years. It could well be that the business is stabilizing. 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 2 warning signs for Public Financial Holdings (of which 1 shouldn't be ignored!) you should know about.

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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.