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Market is not liking SJM Holdings' (HKG:880) earnings decline as stock retreats 3.4% this week

Simply Wall St · 05/21 22:53

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding SJM Holdings Limited (HKG:880) during the five years that saw its share price drop a whopping 74%. We also note that the stock has performed poorly over the last year, with the share price down 27%.

After losing 3.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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Given that SJM Holdings only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last half decade, SJM Holdings saw its revenue increase by 6.1% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 12% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

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

earnings-and-revenue-growth
SEHK:880 Earnings and Revenue Growth May 21st 2025

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for SJM Holdings in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between SJM Holdings' total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that SJM Holdings' TSR, which was a 72% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

SJM Holdings shareholders are down 27% for the year, but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 1 warning sign for SJM Holdings that you should be aware of.

SJM Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.