If you’re building a well-diversified stock portfolio, it’s possible that some of the stocks you select may underperform. However, long-term shareholders Guangzhou Automobile Group Co., Ltd. (HKG:2238) has had an unfortunate performance over the past three years. Sadly for them, the stock price has fallen 58% in that time. More recent buyers have also struggled, with stocks down 28% last year. Shareholders have fared even worse recently, with the stock price down 10% over the past 90 days.
So let’s take a look at whether the company’s long-term performance is in line with the progress of its underlying business.
Check out our latest analysis for Guangzhou Automobile Group.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. One way he looks at how market sentiment has changed over time is to look at the interaction between a company’s stock price and his earnings per share (EPS).
Guangzhou Automobile Group’s EPS has decreased at an average annual rate of 5.9% over the past three years. The 25% share price decline is actually more steep than the EPS slippage. So it seems like the market used to have too much confidence in this business. The less favorable sentiment is reflected in his current PER of 7.86.
The image below shows how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend taking a closer look at its historical growth trends, available here.
What will happen to the dividend?
It’s important to consider not only the share price return, but also the total shareholder return for a particular stock. Whereas the price/earnings ratio 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 much higher than the share price return. Coincidentally, Guangzhou Automobile Group’s TSR over the past three years was -52%, which is better than the share price return mentioned above. Therefore, the dividend paid by the company is total Shareholder returns.
different perspective
Investors in Guangzhou Automobile Group have had a tough year, with a total loss of 24% (including dividends), compared to a market gain of about 3.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the 8% annualized loss over the past five years. I know Baron Rothschild said investors should “buy when there’s blood on the streets,” but investors should first make sure they’re buying a quality business. Warns you that you need to confirm. It’s always interesting to track stock performance over the long term. However, to understand Guangzhou Automobile Group better, you need to consider many other factors. For example, consider the ever-present fear of investment risk. We’ve identified 3 warning signs for you We have partnerships with Guangzhou Automobile Group, and understanding them should be part of the investment process.
However, please note: Guangzhou Automobile Group may not be the best stock to buy.So take a look at this free A list of interesting companies that have grown their earnings in the past (and are predicted to grow in the future).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and the articles are not intended as financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.