The three-year shareholder returns and company earnings persist lower as Angel Yeast (SHSE:600298) stock falls a further 3.7% in past week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Angel Yeast Co., Ltd (SHSE:600298) shareholders, since the share price is down 47% in the last three years, falling well short of the market decline of around 25%. And over the last year the share price fell 22%, so we doubt many shareholders are delighted. More recently, the share price has dropped a further 8.9% in a month. However, we note the price may have been impacted by the broader market, which is down 7.1% in the same time period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Angel Yeast

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. 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.

Angel Yeast saw its EPS decline at a compound rate of 7.7% per year, over the last three years. This reduction in EPS is slower than the 19% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized 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 Angel Yeast's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Angel Yeast, it has a TSR of -44% for the last 3 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 Angel Yeast shareholders are down 21% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.8% 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. 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. Even so, be aware that Angel Yeast is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com