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Centre Testing International Group (SZSE:300012) Investors Are Sitting on a Loss of 51% If They Invested Three Years Ago

Simply Wall St ·  Jan 1 09:08

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Centre Testing International Group Co. Ltd. (SZSE:300012) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 52% decline in the share price in that time. The falls have accelerated recently, with the share price down 17% in the last three months.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During the unfortunate three years of share price decline, Centre Testing International Group actually saw its earnings per share (EPS) improve by 7.4% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 0.8% we doubt that the stock's share price is based on its dividend. Revenue is actually up 11% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Centre Testing International Group further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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SZSE:300012 Earnings and Revenue Growth January 1st 2025

Centre Testing International Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Centre Testing International Group stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Investors in Centre Testing International Group had a tough year, with a total loss of 11% (including dividends), against a market gain of about 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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. Before forming an opinion on Centre Testing International Group you might want to consider these 3 valuation metrics.

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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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