A Look At Qingling Motors' (HKG:1122) Share Price Returns

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Qingling Motors Co., Ltd. (HKG:1122) shareholders, since the share price is down 34% in the last three years, falling well short of the market decline of around 7.7%. The silver lining is that the stock is up 3.1% in about a week.

Check out our latest analysis for Qingling Motors

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 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 that the share price fell, Qingling Motors' earnings per share (EPS) dropped by 22% each year. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Qingling Motors' 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Qingling Motors the TSR over the last 3 years was -14%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Qingling Motors shareholders gained a total return of 7.5% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 1.9% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Qingling Motors better, we need to consider many other factors. Even so, be aware that Qingling Motors is showing 3 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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This article by Simply Wall St is general in nature. 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.
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