Investing in stocks comes with the risk that the share price will fall. And there's no doubt that CMBC Capital Holdings Limited (HKG:1141) stock has had a really bad year. The share price has slid 59% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 33% in that time. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Even though the CMBC Capital Holdings share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Given the yield is quite low, at 1.5%, we doubt the dividend can shed much light on the share price. CMBC Capital Holdings managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at CMBC Capital Holdings's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between CMBC Capital Holdings's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that CMBC Capital Holdings's TSR, which was a 59% drop over the last year, was not as bad as the share price return.
A Different Perspective
CMBC Capital Holdings shareholders are down 59% for the year (even including dividends) , but the market itself is up 9.1%. 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. On the bright side, long term shareholders have made money, with a gain of 7.1% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how CMBC Capital Holdings scores on these 3 valuation metrics.
Of course CMBC Capital Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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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