We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example the Shanghai Industrial Urban Development Group Limited (HKG:563) share price dropped 71% over five years. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 26% in the last three months. But this could be related to the weak market, which is down 16% in the same period.
After losing 17% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for Shanghai Industrial Urban Development Group
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
While the share price declined over five years, Shanghai Industrial Urban Development Group actually managed to increase EPS by an average of 4.2% 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.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Looking to other metrics might better explain the share price change.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).SEHK:563 Earnings and Revenue Growth October 7th 2022
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Shanghai Industrial Urban Development Group, it has a TSR of -63% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Shanghai Industrial Urban Development Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 17% wasn't as bad as the market loss of around 24%. What is more upsetting is the 10% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand Shanghai Industrial Urban Development Group better, we need to consider many other factors. For instance, we've identified 3 warning signs for Shanghai Industrial Urban Development Group (1 is significant) that 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.
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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.