Jiangsu Tongguang Electronic Wire & Cable Co., Ltd. (SZSE:300265) shareholders should be happy to see the share price up 17% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 18% in the last three years, significantly under-performing the market.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Jiangsu Tongguang Electronic Wire & Cable saw its EPS decline at a compound rate of 1.3% per year, over the last three years. This reduction in EPS is slower than the 6% annual reduction in the share price. So it seems the market was too confident about the business, in the past. Having said that, the market is still optimistic, given the P/E ratio of 67.80.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Jiangsu Tongguang Electronic Wire & Cable's key metrics by checking this interactive graph of Jiangsu Tongguang Electronic Wire & Cable's earnings, revenue and cash flow.
A Different Perspective
Jiangsu Tongguang Electronic Wire & Cable shareholders are down 6.7% for the year (even including dividends), but the market itself is up 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should be aware of the 2 warning signs we've spotted with Jiangsu Tongguang Electronic Wire & Cable .
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.
