Hong Kong Technology Venture Company Limited (HKG:1137) shareholders might understandably be very concerned that the share price has dropped 40% in the last quarter.But that does not change the realty that the stock's performance has been terrific, over five years.Indeed, the share price is up a whopping 433% in that time.So it might be that some shareholders are taking profits after good performance.Only time will tell if there is still too much optimism currently reflected in the share price.While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 52% drop, in the last year.
Although Hong Kong Technology Venture has shed HK$651m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for Hong Kong Technology Venture
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.
During the five years of share price growth, Hong Kong Technology Venture moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Hong Kong Technology Venture has grown profits over the years, but the future is more important for shareholders.Take a more thorough look at Hong Kong Technology Venture's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off.Arguably, the TSR gives a more comprehensive picture of the return generated by a stock.We note that for Hong Kong Technology Venture the TSR over the last 5 years was 437%, 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
We regret to report that Hong Kong Technology Venture shareholders are down 52% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%.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. On the bright side, long term shareholders have made money, with a gain of 40% per year over half a decade.It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend.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. For instance, we've identified 2 warning signs for Hong Kong Technology Venturethat you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
