Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term China High Speed Transmission Equipment Group Co., Ltd. (HKG:658) shareholders for doubting their decision to hold, with the stock down 48% over a half decade. The falls have accelerated recently, with the share price down 27% in the last three months. But this could be related to the weak market, which is down 15% in the same period.
On a more encouraging note the company has added CN¥409m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
View our latest analysis for China High Speed Transmission Equipment Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate half decade during which the share price slipped, China High Speed Transmission Equipment Group actually saw its earnings per share (EPS) improve by 3.5% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
Revenue is actually up 21% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).SEHK:658 Earnings and Revenue Growth May 20th 2022
If you are thinking of buying or selling China High Speed Transmission Equipment Group stock, you should check out this FREE detailed report on its balance sheet .
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between China High Speed Transmission Equipment Group's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for China High Speed Transmission Equipment Group shareholders, and that cash payout explains why its total shareholder loss of 44%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While it's never nice to take a loss, China High Speed Transmission Equipment Group shareholders can take comfort that their trailing twelve month loss of 17% wasn't as bad as the market loss of around 23%. Given the total loss of 8% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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 China High Speed Transmission Equipment Group (1 can't be ignored) that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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.