Bank of Zhengzhou Co., Ltd. (HKG:6196) shareholders should be happy to see the share price up 10% in the last month. But that doesn’t help the fact that the three year return is less impressive. After all, the share price is down 18% in the last three years, significantly under-performing the market.
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.
Although the share price is down over three years, Bank of Zhengzhou actually managed to grow EPS by 10% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
We note that, in three years, revenue has actually grown at a 10% annual rate, so that doesn’t seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Bank of Zhengzhou more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Dividend Lost
The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last 3 years, Bank of Zhengzhou generated a TSR of -8.5%, which is, of course, better than the share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.
A Different Perspective
Bank of Zhengzhou shareholders are down 16% for the year, falling short of the market return. The market shed around 8.2%, no doubt weighing on the stock price. The three-year loss of 2.9% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course Bank of Zhengzhou may not be the best stock to buy. So you may wish to see this free collection of growth stocks.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 email@example.com. 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.