Earnings are growing at COSCO SHIPPING Technology (SZSE:002401) but shareholders still don't like its prospects

It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in COSCO SHIPPING Technology Co., Ltd. (SZSE:002401) have tasted that bitter downside in the last year, as the share price dropped 45%. That falls noticeably short of the market decline of around 19%. The silver lining (for longer term investors) is that the stock is still 34% higher than it was three years ago. The falls have accelerated recently, with the share price down 24% in the last three months. But this could be related to the weak market, which is down 13% in the same period.

Since COSCO SHIPPING Technology has shed CN¥401m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for COSCO SHIPPING Technology

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 unfortunate twelve months during which the COSCO SHIPPING Technology share price fell, it actually saw its earnings per share (EPS) improve by 2.0%. Of course, the situation might betray previous over-optimism about growth.

It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.

With a low yield of 1.5% we doubt that the dividend influences the share price much. Revenue was pretty flat on last year, which isn't too bad. But the share price might be lower because the market expected a meaningful improvement, and got none.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that COSCO SHIPPING Technology shareholders are down 44% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 19%. 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 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should learn about the 2 warning signs we've spotted with COSCO SHIPPING Technology (including 1 which shouldn't be ignored) .

We will like COSCO SHIPPING Technology 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.

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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.