Did Changing Sentiment Drive COSCO SHIPPING International (Hong Kong)'s (HKG:517) Share Price Down By 34%?
COSCO SHIPPING International (Hong Kong) Co., Ltd. (HKG:517) shareholders should be happy to see the share price up 17% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 34% in the last three years, falling well short of the market return.
View our latest analysis for COSCO SHIPPING International (Hong Kong)
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.
During the three years that the share price fell, COSCO SHIPPING International (Hong Kong)'s earnings per share (EPS) dropped by 3.5% each year. The share price decline of 13% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on COSCO SHIPPING International (Hong Kong)'s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of COSCO SHIPPING International (Hong Kong), it has a TSR of -22% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 1.0% in the twelve months, COSCO SHIPPING International (Hong Kong) shareholders did even worse, losing 11% (even including dividends) . 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 2.8% per year over five years. 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 business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for COSCO SHIPPING International (Hong Kong) you should be aware of, and 1 of them is significant.
But note: COSCO SHIPPING International (Hong Kong) 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.
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.
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. Thank you for reading.
