It's understandable if you feel frustrated when a stock you own sees a lower share price. But often it is not a reflection of the fundamental business performance. The Zhuhai Huajin Capital Co., Ltd. (SZSE:000532) is down 22% over a year, but the total shareholder return is -21% once you include the dividend. And that total return actually beats the market decline of 23%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 4.2% in three years. It's down 25% in about a month.
Since Zhuhai Huajin Capital has shed CN¥448m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
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.
Unhappily, Zhuhai Huajin Capital had to report a 71% decline in EPS over the last year. The share price fall of 22% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. With a P/E ratio of 51.85, it's fair to say the market sees an EPS rebound on the cards.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
The total return of 21% received by Zhuhai Huajin Capital shareholders over the last year isn't far from the market return of -23%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 0.4% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. It's always interesting to track share price performance over the longer term. But to understand Zhuhai Huajin Capital better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Zhuhai Huajin Capital you should be aware of, and 1 of them shouldn't be ignored.
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.