One of the frustrations of investing is when a stock goes down. But it's hard to avoid some disappointing investments when the overall market is down. While the FAW Jiefang Group Co.,Ltd (SZSE:000800) share price is down 29% in the last three years, the total return to shareholders (which includes dividends) was -21%. That's better than the market which declined 29% over the last three years. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 9.2% in the same timeframe.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
See our latest analysis for FAW Jiefang GroupLtd
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.
FAW Jiefang GroupLtd became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.
Arguably the revenue decline of 43% per year has people thinking FAW Jiefang GroupLtd is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that FAW Jiefang GroupLtd has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for FAW Jiefang GroupLtd in this interactive graph of future profit estimates.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between FAW Jiefang GroupLtd's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that FAW Jiefang GroupLtd's TSR, which was a 21% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
Although it hurts that FAW Jiefang GroupLtd returned a loss of 4.6% in the last twelve months, the broader market was actually worse, returning a loss of 21%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 4% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand FAW Jiefang GroupLtd better, we need to consider many other factors. Even so, be aware that FAW Jiefang GroupLtd is showing 1 warning sign in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.