It is a pleasure to report that the China Automotive Systems, Inc. (NASDAQ:CAAS) is up 47% in the last quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 61% in that time. Some might say the recent bounce is to be expected after such a bad drop. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
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.
During five years of share price growth, China Automotive Systems moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
The revenue fall of 0.08% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling China Automotive Systems stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's nice to see that China Automotive Systems shareholders have received a total shareholder return of 33% over the last year. That certainly beats the loss of about 10% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China Automotive Systems you should know about.
If you are like me, then you will not want to miss this free list of growing companies 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 US exchanges.
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. 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.
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