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It’s easy to feel disappointed if you buy a stock that goes down. But sometimes broader market conditions have more of an impact on prices than the actual business performance. The Guangzhou Rural Commercial Bank Co., Ltd. (HKG:1551) is down 12% over a year, but the total shareholder return is -7.5% once you include the dividend. And that total return actually beats the market return of -13%. Guangzhou Rural Commercial Bank hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. It’s up 2.5% in the last seven days.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Guangzhou Rural Commercial Bank share price fell, it actually saw its earnings per share (EPS) improve by 5.2%. Of course, the situation might betray previous over-optimism about growth. It’s surprising to see the share price fall so much, despite the improved EPS. So it’s well worth checking out some other metrics, too.
Guangzhou Rural Commercial Bank’s dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn’t seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Guangzhou Rural Commercial Bank’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Guangzhou Rural Commercial Bank, it has a TSR of -7.5% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s not great that Guangzhou Rural Commercial Bank shares failed to make money for shareholders in the last year, but the silver lining is that the loss of 7.5%, including dividends, wasn’t as bad as the broader market loss of about 13%. The falls have continued up until the last quarter, with the share price down 4.8% in that time. Momentum traders would generally avoid a stock if the share price is in a downtrend. We prefer keep an eye on the trends in business metrics like revenue or EPS. Before forming an opinion on Guangzhou Rural Commercial Bank you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.