The 11% return this week takes Kingsoft's (HKG:3888) shareholders five-year gains to 47%
Investors who choose individual stocks aim to find ones that will perform better than the overall market. One way to achieve higher returns is to invest in companies that are not being valued accurately by the market. For example, Kingsoft's share price has risen by 44% over the last five years, which is significantly better than the market's fall of 21% when dividends are excluded. However, the gains made in more recent times have been less impressive, with shareholders seeing an increase of only 17%, including dividends.
As the stock market value increased by HK$4.8b in just one week, it's worth exploring if the fundamental performance is responsible for sustained profits.
Take a look at our most recent evaluation of Kingsoft
Analyzing Kingsoft: SWOT Assessment
In simpler terms, according to Benjamin Graham, the market's behavior can be divided into two parts: short term and long term. In the short term, people tend to vote with their actions, but in the long term, objective fundamentals determine a stock's worth. By examining changes in earnings per share (EPS) and stock prices over time, we can understand how investors' perceptions of a company have evolved.
Over a span of five years where Kingsoft observed an increase in their share price, their EPS, unfortunately, decreased by 60% each year. The difference can be partially ascribed to the influence of extraordinary items on earnings, specifically in the previous year.
Basically, it appears doubtful that investors are paying attention to EPS. As there doesn't seem to be a connection between the shift in EPS and the fluctuation in stock price, it would be beneficial to examine alternative measures.
The stock's low 0.4% dividend yield is unlikely to be drawing in many interested buyers. However, Kingsoft has been seeing steady revenue growth of 8.2% over the past five years. The management may be more focused on expanding revenue rather than increasing earnings per share at this time.
The picture underneath illustrates the progression of earnings and income throughout the years (by selecting the image, you can observe more specific information).
It's important to highlight that the CEO receives a salary that is lower than the average for companies of similar size. Nonetheless, it's vital to consider beyond the CEO's compensation and contemplate whether the company can boost its earnings in the future. To assist you in forming an opinion about Kingsoft, this report, which exhibits analyst projections, is available at no cost.
Investors should not only look at the share price return when deciding where to invest. They should also take into account the total shareholder return (TSR), which includes the cash dividends received (if they were reinvested) as well as any discounted capital raisings and spin-offs. If a company gives out high dividends, their TSR may be much higher than their share price return. Kingsoft's TSR in the past 5 years was 47%, which is better than the aforementioned share price return. The company's dividends helped increase the total shareholder return.
It's great news that Kingsoft shareholders have gained a 17% return on their investment in the past year, considering the dividend. This is even better than the total shareholder return over a five-year period, which is only 8%. It appears that the company has been receiving positive feedback recently, given the strong momentum of the share price. Therefore, it might be worthwhile to investigate this further to avoid missing out on a good opportunity. While it's interesting to observe the share price performance over an extended period, it is essential to take into account various factors to comprehend Kingsoft better, such as potential risks. Every company has these, and our team has discovered one warning sign related to Kingsoft that everyone should be aware of.
If you enjoy discovering successful investments, this complimentary compilation of flourishing businesses that have acquired shares by insiders recently might be precisely what you need.
Kindly take note that the market returns mentioned in this article are based on the average returns of all the stocks that are being traded on the Hong Kong stock exchanges.
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This blog post from Simply Wall St gives a broad overview of a topic. They give their thoughts based on past information and expert predictions. Their writing is impartial and they aren't offering financial guidance. They aren't suggesting that you should purchase or sell any stocks, and their opinion doesn't consider your goals or finances. They want to provide you with a deep-dive analysis that concentrates on the basics. However, it's crucial to note that they may not have up-to-date, critical details about any firms that they mention. Finally, Simply Wall St has no stake in the stocks that they discuss.
