While not a mind-blowing move, it is good to see that the Aluminum Corporation of China Limited (HKG:2600) share price has gained 14% in the last three months. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 33% in the last year, well below the market return.
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 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.
Unfortunately Aluminum of China reported an EPS drop of 10% for the last year. The share price decline of 33% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Aluminum of China has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Aluminum of China’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 8.5% in the twelve months, Aluminum of China shareholders did even worse, losing 33%. 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. Longer term investors wouldn’t be so upset, since they would have made 3.4%, 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. Before deciding if you like the current share price, check how Aluminum of China scores on these 3 valuation metrics.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.