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Did You Manage To Avoid Shanghai Jin Jiang Capital's (HKG:2006) Painful 51% Share Price Drop?

Simply Wall St

Shanghai Jin Jiang Capital Company Limited (HKG:2006) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 51% in that time, significantly under-performing the market.

Check out our latest analysis for Shanghai Jin Jiang Capital

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.

Looking back five years, both Shanghai Jin Jiang Capital's share price and EPS declined; the latter at a rate of 0.8% per year. This reduction in EPS is less than the 13% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 9.75 further reflects this reticence.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SEHK:2006 Past and Future Earnings, November 19th 2019

This free interactive report on Shanghai Jin Jiang Capital's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Shanghai Jin Jiang Capital's TSR for the last 5 years was -42%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 1.2% in the last year, Shanghai Jin Jiang Capital shareholders lost 29% (even including dividends) . 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 10% over the last half decade. We realise that Buffett 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 businesses. Keeping this in mind, a solid next step might be to take a look at Shanghai Jin Jiang Capital's dividend track record. This free interactive graph is a great place to start.

But note: Shanghai Jin Jiang Capital 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 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 editorial-team@simplywallst.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.