It's been a soft week for CITIC Heavy Industries Co., Ltd. (SHSE:601608) shares, which are down 11%. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 27%, less than the market return of 30%.
While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
View our latest analysis for CITIC Heavy Industries
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, CITIC Heavy Industries managed to grow its earnings per share at 16% a year. This EPS growth is higher than the 5% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 67.10, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While it's certainly disappointing to see that CITIC Heavy Industries shares lost 6.9% throughout the year, that wasn't as bad as the market 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 5% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand CITIC Heavy Industries better, we need to consider many other factors. For example, we've discovered 1 warning sign for CITIC Heavy Industries that you should be aware of before investing here.
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.
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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.