Optimism around Beijing Urban Construction Investment & Development (SHSE:600266) delivering new earnings growth may be shrinking as stock declines 7.4% this past week

Beijing Urban Construction Investment & Development Co., Ltd. (SHSE:600266) shareholders should be happy to see the share price up 10% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 32% in that half decade.

If the past week is anything to go by, investor sentiment for Beijing Urban Construction Investment & Development isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Beijing Urban Construction Investment & Development

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Looking back five years, both Beijing Urban Construction Investment & Development's share price and EPS declined; the latter at a rate of 43% per year. This fall in the EPS is worse than the 7% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 79.28 suggests that shareholders believe earnings will grow in the years ahead.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Beijing Urban Construction Investment & Development 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?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Beijing Urban Construction Investment & Development's TSR for the last 5 years was -24%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 13% in the twelve months, Beijing Urban Construction Investment & Development shareholders did even worse, losing 17% (even including dividends). 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 4% 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. It's always interesting to track share price performance over the longer term. But to understand Beijing Urban Construction Investment & Development better, we need to consider many other factors. Take risks, for example - Beijing Urban Construction Investment & Development has 4 warning signs we think you should be aware of.

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.