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COSCO SHIPPING Development's (HKG:2866) earnings growth rate lags the 23% CAGR delivered to shareholders

Simply Wall St ·  {{timeTz}}

COSCO SHIPPING Development Co., Ltd. (HKG:2866) shareholders might be concerned after seeing the share price drop 20% in the last week. But that doesn't change the fact that the returns over the last three years have been pleasing. In fact, the company's share price bested the return of its market index in that time, posting a gain of 38%.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for COSCO SHIPPING Development

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).

COSCO SHIPPING Development was able to grow its EPS at 50% per year over three years, sending the share price higher. The average annual share price increase of 11% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 2.22.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growthSEHK:2866 Earnings Per Share Growth July 31st 2022

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 COSCO SHIPPING Development the TSR over the last 3 years was 86%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that COSCO SHIPPING Development shareholders have received a total shareholder return of 5.5% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.5% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand COSCO SHIPPING Development better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for COSCO SHIPPING Development you should know about.

But note: COSCO SHIPPING Development may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

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