It's been a soft week for China Baofeng (International) Limited (HKG:3966) shares, which are down 15%. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 306%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term.
See our latest analysis for China Baofeng (International)
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Over half a decade, China Baofeng (International) managed to grow its earnings per share at 81% a year. This EPS growth is higher than the 32% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 2.89.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of China Baofeng (International)'s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered China Baofeng (International)'s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that China Baofeng (International)'s TSR of 339% over the last 5 years is better than the share price return.
A Different Perspective
We regret to report that China Baofeng (International) shareholders are down 19% for the year. Unfortunately, that's worse than the broader market decline of 3.4%. 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. Longer term investors wouldn't be so upset, since they would have made 34%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.