Stock Analysis

What Type Of Returns Would Jilin Jiutai Rural Commercial Bank's(HKG:6122) Shareholders Have Earned If They Purchased Their SharesThree Years Ago?

SEHK:6122
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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Jilin Jiutai Rural Commercial Bank Corporation Limited (HKG:6122) shareholders have had that experience, with the share price dropping 43% in three years, versus a market decline of about 3.2%.

Check out our latest analysis for Jilin Jiutai Rural Commercial Bank

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Jilin Jiutai Rural Commercial Bank's earnings per share (EPS) dropped by 13% each year. This reduction in EPS is slower than the 17% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 7.92.

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

earnings-per-share-growth
SEHK:6122 Earnings Per Share Growth January 16th 2021

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Jilin Jiutai Rural Commercial Bank's 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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Jilin Jiutai Rural Commercial Bank's TSR for the last 3 years was -31%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Jilin Jiutai Rural Commercial Bank shareholders are up 3.3% for the year (even including dividends). It's always nice to make money but this return falls short of the market return which was about 12% for the year. The silver lining is that the recent rise is far preferable to the annual loss of 10% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. It's always interesting to track share price performance over the longer term. But to understand Jilin Jiutai Rural Commercial Bank better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Jilin Jiutai Rural Commercial Bank you should be aware of, and 1 of them makes us a bit uncomfortable.

Jilin Jiutai Rural Commercial Bank is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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