As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term COFCO Biotechnology Co., Ltd. (SZSE:000930) shareholders have had that experience, with the share price dropping 47% in three years, versus a market decline of about 31%. And over the last year the share price fell 32%, so we doubt many shareholders are delighted. Furthermore, it's down 24% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.
After losing 5.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
COFCO Biotechnology saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on COFCO Biotechnology's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between COFCO Biotechnology's total shareholder return (TSR) and its share price return. 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. COFCO Biotechnology's TSR of was a loss of 41% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We regret to report that COFCO Biotechnology shareholders are down 32% for the year. Unfortunately, that's worse than the broader market decline of 16%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. You could get a better understanding of COFCO Biotechnology's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.