Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Dongfeng Electronic Technology Co.,Ltd. (SHSE:600081) have tasted that bitter downside in the last year, as the share price dropped 12%. That contrasts poorly with the market decline of 4.8%. However, the longer term returns haven't been so bad, with the stock down 7.7% in the last three years. It's down 15% in about a month.
Since Dongfeng Electronic TechnologyLtd has shed CN¥419m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
See our latest analysis for Dongfeng Electronic TechnologyLtd
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Unhappily, Dongfeng Electronic TechnologyLtd had to report a 74% decline in EPS over the last year. This fall in the EPS is significantly worse than the 12% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 70.68, it's fair to say the market sees an EPS rebound on the cards.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Dongfeng Electronic TechnologyLtd's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Dongfeng Electronic TechnologyLtd's TSR for the last 1 year was -6.8%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Dongfeng Electronic TechnologyLtd shareholders are down 6.8% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.8%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Dongfeng Electronic TechnologyLtd better, we need to consider many other factors. Even so, be aware that Dongfeng Electronic TechnologyLtd is showing 3 warning signs in our investment analysis , you should know about...
We will like Dongfeng Electronic TechnologyLtd better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.