CITIC Resources Holdings Limited (HKG:1205) shareholders will doubtless be very grateful to see the share price up 33% in the last quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 52% in the last three years, significantly under-performing the market.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, CITIC Resources Holdings moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.
We think that the revenue decline over three years, at a rate of 16% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on CITIC Resources Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between CITIC Resources Holdings' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for CITIC Resources Holdings shareholders, and that cash payout explains why its total shareholder loss of 49%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
It's nice to see that CITIC Resources Holdings shareholders have received a total shareholder return of 25% over the last year. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for CITIC Resources Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.
Of course CITIC Resources Holdings 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.
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