The three-year shareholder returns and company earnings persist lower as Tangshan Sanyou Chemical IndustriesLtd (SHSE:600409) stock falls a further 8.4% in past week

Simply Wall St · 10/15 22:40

Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) shareholders should be happy to see the share price up 25% in the last month. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 46% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

With the stock having lost 8.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Tangshan Sanyou Chemical IndustriesLtd

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.

Tangshan Sanyou Chemical IndustriesLtd saw its EPS decline at a compound rate of 30% per year, over the last three years. In comparison the 18% compound annual share price decline isn't as bad as the EPS drop-off. 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.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
SHSE:600409 Earnings Per Share Growth October 15th 2024

We know that Tangshan Sanyou Chemical IndustriesLtd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Tangshan Sanyou Chemical IndustriesLtd's TSR for the last 3 years was -41%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Tangshan Sanyou Chemical IndustriesLtd shareholders have received a total shareholder return of 0.9% over one year. That's including the dividend. However, that falls short of the 4% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Tangshan Sanyou Chemical IndustriesLtd that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.