Investing in stocks inevitably means buying into some companies that perform poorly. But long term Micro-Mechanics (Holdings) Ltd. (SGX:5DD) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 58% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 32% in the last year. Furthermore, it’s down 28% in about a quarter. That’s not much fun for holders.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
See our latest analysis for Micro-Mechanics (Holdings)
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Micro-Mechanics (Holdings) saw its EPS decline at a compound rate of 23% per year, over the last three years. This change in EPS is reasonably close to the 25% average annual decrease in the share price. So it seems like sentiment towards the stock hasn’t changed all that much over time. In this case, it seems that the EPS is guiding the share price.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Micro-Mechanics (Holdings)’s earnings, revenue and cash flow.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Micro-Mechanics (Holdings)’s TSR for the last 3 years was -52%, 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
While the broader market lost about 3.1% in the twelve months, Micro-Mechanics (Holdings) shareholders did even worse, losing 30% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We’ve spotted 3 warning signs for Micro-Mechanics (Holdings) you should be aware of, and 1 of them is significant.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singaporean 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.
