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We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding China South City Holdings Limited (HKG:1668) during the five years that saw its share price drop a whopping 76%. The good news is that the stock is up 2.2% in the last week.
View our latest analysis for China South City Holdings
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Looking back five years, both China South City Holdings's share price and EPS declined; the latter at a rate of 6.3% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 25% per year, over the period. 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 2.33.
The graphic below depicts how EPS has changed over time (unveil 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. Dive deeper into the earnings by checking this interactive graph of China South City Holdings'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of China South City Holdings, it has a TSR of -70% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Investors in China South City Holdings had a tough year, with a total loss of 20% (including dividends) , against a market gain of about 5.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 21% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before forming an opinion on China South City Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.