Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Yangtze Optical Fibre And Cable Joint Stock Limited Company (HKG:6869) have tasted that bitter downside in the last year, as the share price dropped 39%. That contrasts poorly with the market return of 6.3%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 13% in three years. Shareholders have had an even rougher run lately, with the share price down 10% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 4.3% in the same timeframe.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately Yangtze Optical Fibre And Cable Limited reported an EPS drop of 33% for the last year. This proportional reduction in earnings per share isn't far from the 39% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Yangtze Optical Fibre And Cable Limited's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Yangtze Optical Fibre And Cable Limited's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Yangtze Optical Fibre And Cable Limited's TSR of was a loss of 37% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Yangtze Optical Fibre And Cable Limited shareholders are down 37% for the year, but the broader market is up 6.3%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 2.5% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before spending more time on Yangtze Optical Fibre And Cable Limited it might be wise to click here to see if insiders have been buying or selling shares.
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 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 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. Thank you for reading.