Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Pingtan Marine Enterprise Ltd. (NASDAQ:PME) have had an unfortunate run in the last three years. So they might be feeling emotional about the 67% share price collapse, in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 56% lower in that time. The falls have accelerated recently, with the share price down 49% in the last three months.
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.
During five years of share price growth, Pingtan Marine Enterprise moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.
Revenue is actually up 35% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Pingtan Marine Enterprise more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil 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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Pingtan Marine Enterprise stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We've already covered Pingtan Marine Enterprise's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Pingtan Marine Enterprise shareholders, and that cash payout explains why its total shareholder loss of 67%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 24% in the last year, Pingtan Marine Enterprise shareholders lost 56%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 16% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 6 warning signs for Pingtan Marine Enterprise (3 are significant!) that you should be aware of before investing here.
But note: Pingtan Marine Enterprise may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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