Zhejiang Chint Electrics Co., Ltd. (SHSE:601877) shareholders should be happy to see the share price up 13% in the last month. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 61% in that period. So it's good to see it climbing back up. The rise has some hopeful, but turnarounds are often precarious.
If the past week is anything to go by, investor sentiment for Zhejiang Chint Electrics isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
See our latest analysis for Zhejiang Chint Electrics
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Zhejiang Chint Electrics saw its EPS decline at a compound rate of 17% per year, over the last three years. The share price decline of 27% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Zhejiang Chint Electrics' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Zhejiang Chint Electrics' TSR for the last 3 years was -59%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
While the broader market lost about 0.6% in the twelve months, Zhejiang Chint Electrics shareholders did even worse, losing 7.4% (even including dividends). 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 1.0%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Zhejiang Chint Electrics has 1 warning sign we think you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.