Investors who have held Kingfa Sci. & Tech (SHSE:600143) over the last three years have watched its earnings decline along with their investment
Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Kingfa Sci. & Tech. Co., Ltd. (SHSE:600143) shareholders, since the share price is down 33% in the last three years, falling well short of the market decline of around 20%.
On a more encouraging note the company has added CN¥1.1b to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
See our latest analysis for Kingfa Sci. & Tech
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the three years that the share price fell, Kingfa Sci. & Tech's earnings per share (EPS) dropped by 41% each year. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Kingfa Sci. & Tech's key metrics by checking this interactive graph of Kingfa Sci. & Tech'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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Kingfa Sci. & Tech, it has a TSR of -29% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Kingfa Sci. & Tech shareholders have received a total shareholder return of 21% over one year. And that does include the dividend. That's better than the annualised return of 1.0% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should learn about the 3 warning signs we've spotted with Kingfa Sci. & Tech (including 1 which is a bit concerning) .
But note: Kingfa Sci. & Tech may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Valuation is complex, but we're here to simplify it.
Discover if Kingfa Sci. & Tech might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SHSE:600143
Kingfa Sci. & Tech
Engages in the research, development, production, and sale of plastic products in worldwide.
Moderate growth potential low.