Earnings growth of 6.1% over 3 years hasn't been enough to translate into positive returns for Jiaze Renewables (SHSE:601619) shareholders

Simply Wall St · 10/18 02:09

Jiaze Renewables Corporation Limited (SHSE:601619) shareholders should be happy to see the share price up 13% in the last month. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 46% in the last three years, significantly under-performing the market.

After losing 6.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Jiaze Renewables

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

Although the share price is down over three years, Jiaze Renewables actually managed to grow EPS by 20% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

The modest 0.7% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 25% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Jiaze Renewables more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
SHSE:601619 Earnings and Revenue Growth October 18th 2024

This free interactive report on Jiaze Renewables' balance sheet strength is a great place to start, if you want to investigate the stock further.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Jiaze Renewables the TSR over the last 3 years was -41%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Jiaze Renewables had a tough year, with a total loss of 14% (including dividends), against a market gain of about 1.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Jiaze Renewables that you should be aware of before investing here.

But note: Jiaze Renewables may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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