For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term BOC International (China) CO., LTD (SHSE:601696) shareholders, since the share price is down 49% in the last three years, falling well short of the market return of around 18%.
Since BOC International (China) has shed CN¥1.4b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for BOC International (China)
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, BOC International (China)'s earnings per share (EPS) dropped by 3.1% each year. This reduction in EPS is slower than the 20% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into BOC International (China)'s key metrics by checking this interactive graph of BOC International (China)'s earnings, revenue and cash flow.
A Different Perspective
Over the last year, BOC International (China) shareholders took a loss of 9.5%, including dividends. In contrast the market gained about 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, the longer term story isn't pretty, with investment losses running at 14% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Is BOC International (China) cheap compared to other companies? These 3 valuation measures might help you decide.
But note: BOC International (China) 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 Chinese 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.