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China Galaxy Securities Co., Ltd. (HKG:6881) shareholders should be happy to see the share price up 12% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 42% in the last three years, falling well short of the market return.
View our latest analysis for China Galaxy Securities
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
China Galaxy Securities saw its EPS decline at a compound rate of 15% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 17% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that China Galaxy Securities has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. 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 Galaxy Securities, it has a TSR of -37% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that China Galaxy Securities shareholders have received a total shareholder return of 17% over one year. Of course, that includes the dividend. That certainly beats the loss of about 2.1% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Before forming an opinion on China Galaxy Securities you might want to consider these 3 valuation metrics.