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It might be of some concern to shareholders to see the Guangzhou Automobile Group Co., Ltd. (HKG:2238) share price down 17% in the last month. Looking further back, the stock has generated good profits over five years. Its return of 46% has certainly bested the market return!
Check out our latest analysis for Guangzhou Automobile Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Guangzhou Automobile Group managed to grow its earnings per share at 32% a year. This EPS growth is higher than the 7.8% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.16.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Guangzhou Automobile Group's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Guangzhou Automobile Group, it has a TSR of 70% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Guangzhou Automobile Group shareholders are down 19% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. 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. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Guangzhou Automobile Group you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.