China Everbright Bank Company Limited (SHSE:601818) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 24%, which falls well short of the return you could get by buying an index fund.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for China Everbright Bank
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).
During the five years over which the share price declined, China Everbright Bank's earnings per share (EPS) dropped by 0.1% each year. This reduction in EPS is less than the 5% annual reduction in the share price. 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 5.16.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on China Everbright Bank's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of China Everbright Bank, it has a TSR of 2.5% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
It's good to see that China Everbright Bank has rewarded shareholders with a total shareholder return of 20% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 0.5%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 China Everbright Bank 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.
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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.