It is doubtless a positive to see that the Zhong Hua International Holdings Limited (HKG:1064) share price has gained some 37% in the last three months. But over the last three years we've seen a quite serious decline. Regrettably, the share price slid 50% in that period. So it is really good to see an improvement. After all, could be that the fall was overdone.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Zhong Hua International Holdings saw its EPS decline at a compound rate of 22% per year, over the last three years. This change in EPS is reasonably close to the 21% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Zhong Hua International Holdings's key metrics by checking this interactive graph of Zhong Hua International Holdings's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Zhong Hua International Holdings shareholders have received a total shareholder return of 14% over the last year. Notably the five-year annualised TSR loss of 7.9% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Zhong Hua International Holdings better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Zhong Hua International Holdings (including 1 which is is significant) .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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