Reflecting on Harbin Electric's (HKG:1133) Share Price Returns Over The Last Five Years

The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Harbin Electric Company Limited (HKG:1133) shareholders for doubting their decision to hold, with the stock down 41% over a half decade. Unfortunately the share price momentum is still quite negative, with prices down 12% in thirty days.

See our latest analysis for Harbin Electric

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Looking back five years, both Harbin Electric's share price and EPS declined; the latter at a rate of 31% per year. The share price decline of 10% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Harbin Electric shareholders are down 2.7% for the year, but the market itself is up 5.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Harbin Electric better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Harbin Electric (including 1 which makes us a bit uncomfortable) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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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