In This Article:
Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the China Zheshang Bank Co., Ltd (HKG:2016) share price. It's up 11% over three years, but that is below the market return. Disappointingly, the share price is down 6.2% in the last year.
View our latest analysis for China Zheshang Bank
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.
During three years of share price growth, China Zheshang Bank achieved compound earnings per share growth of 4.0% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 3.7% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.
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 Zheshang Bank's earnings, revenue and cash flow.
A Dividend Lost
It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last 3 years, China Zheshang Bank generated a TSR of 28%, which is, of course, better than the share price return. Even though the company isn't paying dividends at the moment, it has done in the past.
A Different Perspective
The last twelve months weren't great for China Zheshang Bank shares, which performed worse than the market, costing holders 1.5%. Meanwhile, the broader market slid about 0.2%, likely weighing on the stock. Investors are up over three years, booking 8.5% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Before deciding if you like the current share price, check how China Zheshang Bank scores on these 3 valuation metrics.