It hasn't been the best quarter for COSCO SHIPPING Technology Co., Ltd. (SZSE:002401) shareholders, since the share price has fallen 22% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 80% in that time.
Since the stock has added CN¥361m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
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, COSCO SHIPPING Technology managed to grow its earnings per share at 20% a year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into COSCO SHIPPING Technology's key metrics by checking this interactive graph of COSCO SHIPPING Technology's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, COSCO SHIPPING Technology's TSR for the last 5 years was 87%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's never nice to take a loss, COSCO SHIPPING Technology shareholders can take comfort that , including dividends,their trailing twelve month loss of 13% wasn't as bad as the market loss of around 23%. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with COSCO SHIPPING Technology , and understanding them should be part of your investment process.
We will like COSCO SHIPPING Technology 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.