share_log

Pulling Back 8.9% This Week, Shenzhen AOTO Electronics' SZSE:002587) Five-year Decline in Earnings May Be Coming Into Investors Focus

Simply Wall St ·  Oct 24, 2023 03:20

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Shenzhen AOTO Electronics Co., Ltd. (SZSE:002587) share price is up 31% in the last five years, that's less than the market return. However, more recent buyers should be happy with the increase of 21% over the last year.

Although Shenzhen AOTO Electronics has shed CN¥401m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Shenzhen AOTO Electronics

Given that Shenzhen AOTO Electronics only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last half decade Shenzhen AOTO Electronics' revenue has actually been trending down at about 12% per year. The stock is only up 6% for each year during the period. That's pretty decent given the top line decline, and lack of profits. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
SZSE:002587 Earnings and Revenue Growth October 24th 2023

We know that Shenzhen AOTO Electronics has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shenzhen AOTO Electronics the TSR over the last 5 years was 38%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Shenzhen AOTO Electronics has rewarded shareholders with a total shareholder return of 22% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Shenzhen AOTO Electronics you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
    Write a comment