It hasn't been the best quarter for Center International Group Co.,Ltd. (SHSE:603098) shareholders, since the share price has fallen 23% in that time. On the bright side the returns have been quite good over the last half decade. Its return of 69% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 49% drop, in the last year.
In light of the stock dropping 5.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
See our latest analysis for Center International GroupLtd
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.
Center International GroupLtd's earnings per share are down 28% per year, despite strong share price performance over five years.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 0.3% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 7.3% per year is probably viewed as evidence that Center International GroupLtd is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Center International GroupLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Center International GroupLtd the TSR over the last 5 years was 74%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 4.5% in the twelve months, Center International GroupLtd shareholders did even worse, losing 49% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Center International GroupLtd , and understanding them should be part of your investment process.
But note: Center International GroupLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
