Guanghui LogisticsLtd (SHSE:600603) shareholders notch a 8.8% CAGR over 3 years, yet earnings have been shrinking

While Guanghui Logistics Co.Ltd (SHSE:600603) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 27% in the last quarter. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 29%.

Since the stock has added CN¥768m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Guanghui LogisticsLtd

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 the three years of share price growth, Guanghui LogisticsLtd actually saw its earnings per share (EPS) drop 18% per year.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 8.0% per year). The only thing that's clear is there is low correlation between Guanghui LogisticsLtd's share price and its historic fundamental data. Further research may be required!

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Guanghui LogisticsLtd has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Guanghui LogisticsLtd stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that Guanghui LogisticsLtd shareholders are down 26% for the year. Unfortunately, that's worse than the broader market decline of 16%. 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. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Guanghui LogisticsLtd (of which 1 shouldn't be ignored!) you should know about.

We will like Guanghui LogisticsLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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

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