While it may not be enough for some shareholders, we think it is good to see the Jiangnan Group Limited (HKG:1366) share price up 29% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 71% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround.
View our latest analysis for Jiangnan Group
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years over which the share price declined, Jiangnan Group's earnings per share (EPS) dropped by 22% each year. In this case, the EPS change is really very close to the share price drop of 22% a year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price change has reflected changes in earnings per share.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Jiangnan Group's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Jiangnan Group'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. Its history of dividend payouts mean that Jiangnan Group's TSR, which was a 67% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
While the broader market gained around 3.4% in the last year, Jiangnan Group shareholders lost 4.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 20% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.