For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Shanghai QiFan Cable Co., Ltd (SHSE:605222) shareholders, since the share price is down 30% in the last three years, falling well short of the market decline of around 5.8%. Even worse, it's down 12% in about a month, which isn't fun at all.
Since Shanghai QiFan Cable has shed CN¥502m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Shanghai QiFan Cable
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. 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.
Shanghai QiFan Cable saw its EPS decline at a compound rate of 0.2% per year, over the last three years. The share price decline of 11% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Shanghai QiFan Cable's key metrics by checking this interactive graph of Shanghai QiFan Cable's earnings, revenue and cash flow.
A Different Perspective
Shanghai QiFan Cable shareholders are down 15% for the year (even including dividends), falling short of the market return. Meanwhile, the broader market slid about 7.5%, likely weighing on the stock. The three-year loss of 9% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Shanghai QiFan Cable better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Shanghai QiFan Cable (of which 1 makes us a bit uncomfortable!) you should know about.
We will like Shanghai QiFan Cable 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.