If You Had Bought China Dongxiang (Group) (HKG:3818) Stock Five Years Ago, You'd Be Sitting On A 61% Loss, Today
Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term China Dongxiang (Group) Co., Ltd. (HKG:3818) shareholders for doubting their decision to hold, with the stock down 61% over a half decade. And some of the more recent buyers are probably worried, too, with the stock falling 42% in the last year. The falls have accelerated recently, with the share price down 22% in the last three months. Of course, this share price action may well have been influenced by the 14% decline in the broader market, throughout the period.
Check out our latest analysis for China Dongxiang (Group)
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the unfortunate half decade during which the share price slipped, China Dongxiang (Group) actually saw its earnings per share (EPS) improve by 4.5% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Looking to other metrics might better explain the share price change.
The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think China Dongxiang (Group) will earn in the future (free profit 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. In the case of China Dongxiang (Group), it has a TSR of -35% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that China Dongxiang (Group) shareholders are down 39% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 18%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8.3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand China Dongxiang (Group) better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for China Dongxiang (Group) you should be aware of, and 1 of them is significant.
China Dongxiang (Group) is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
