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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term China Huarong Asset Management Co., Ltd. (HKG:2799) shareholders. Unfortunately, they have held through a 64% decline in the share price in that time. The more recent news is of little comfort, with the share price down 40% in a year. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
See our latest analysis for China Huarong Asset Management
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, China Huarong Asset Management's earnings per share (EPS) dropped by 55% each year. This fall in the EPS is worse than the 29% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on China Huarong Asset Management's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 China Huarong Asset Management, it has a TSR of -59% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
The last twelve months weren't great for China Huarong Asset Management shares, which performed worse than the market, costing holders 40%, including dividends. The market shed around 11%, no doubt weighing on the stock price. The three-year loss of 26% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Is China Huarong Asset Management cheap compared to other companies? These 3 valuation measures might help you decide.