Huida Sanitary WareLtd (SHSE:603385) adds CN¥260m to market cap in the past 7 days, though investors from five years ago are still down 23%

Simply Wall St · 10/25 23:35

Huida Sanitary Ware Co.,Ltd (SHSE:603385) shareholders should be happy to see the share price up 23% in the last month. 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 29%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added CN¥260m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

See our latest analysis for Huida Sanitary WareLtd

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 five years Huida Sanitary WareLtd's earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

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:603385 Earnings Per Share Growth October 25th 2024

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About The Total Shareholder Return (TSR)?

We've already covered Huida Sanitary WareLtd's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Huida Sanitary WareLtd's TSR, which was a 23% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

Investors in Huida Sanitary WareLtd had a tough year, with a total loss of 13%, against a market gain of about 7.5%. 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 4% 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. Even so, be aware that Huida Sanitary WareLtd is showing 1 warning sign in our investment analysis , you should know about...

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