Cinda Real Estate (SHSE:600657) shareholders have lost 26% over 3 years, earnings decline likely the culprit

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Cinda Real Estate Co., Ltd. (SHSE:600657) shareholders, since the share price is down 28% in the last three years, falling well short of the market decline of around 1.2%. More recently, the share price has dropped a further 8.4% in a month.

Since Cinda Real Estate has shed CN¥485m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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.

Cinda Real Estate saw its EPS decline at a compound rate of 45% per year, over the last three years. This fall in the EPS is worse than the 10% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 78.23, it's fair to say the market sees a brighter future for the business.

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

This free interactive report on Cinda Real Estate's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Cinda Real Estate shareholders have received a total shareholder return of 20% over one year. That's better than the annualised return of 6% 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. It's always interesting to track share price performance over the longer term. But to understand Cinda Real Estate better, we need to consider many other factors. Take risks, for example - Cinda Real Estate has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

We will like Cinda Real Estate 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.