Shenzhen Investment (HKG:604) Shareholders Have Felt Some Pain With A 16% Loss On Their Investment
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Shenzhen Investment Limited (HKG:604), since the last five years saw the share price fall 37%. But it's up 8.6% in the last week.
View our latest analysis for Shenzhen Investment
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, Shenzhen Investment's earnings per share (EPS) dropped by 2.4% each year. This reduction in EPS is less than the 8.8% annual reduction in the share price. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 5.32.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Shenzhen Investment has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Shenzhen Investment will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Shenzhen Investment's TSR for the last 5 years was -16%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that Shenzhen Investment shareholders are down 14% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3.5% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Investment better, we need to consider many other factors. Even so, be aware that Shenzhen Investment is showing 4 warning signs in our investment analysis , and 2 of those are a bit concerning...
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.
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.
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