The five-year loss for CRCC High-Tech Equipment (HKG:1786) shareholders likely driven by its shrinking earnings

By
Simply Wall St
Published
September 02, 2021
SEHK:1786
Source: Shutterstock

It's nice to see the CRCC High-Tech Equipment Corporation Limited (HKG:1786) share price up 11% in a week. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 76% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The important question is if the business itself justifies a higher share price in the long term.

The recent uptick of 11% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

See our latest analysis for CRCC High-Tech Equipment

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Looking back five years, both CRCC High-Tech Equipment's share price and EPS declined; the latter at a rate of 47% per year. This fall in the EPS is worse than the 25% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 52.43 suggests that shareholders believe earnings will grow in the years ahead.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
SEHK:1786 Earnings Per Share Growth September 2nd 2021

It might be well worthwhile taking a look at our free report on CRCC High-Tech Equipment's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between CRCC High-Tech Equipment's total shareholder return (TSR) and its share price change, which we've covered above. 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. Its history of dividend payouts mean that CRCC High-Tech Equipment's TSR, which was a 73% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

CRCC High-Tech Equipment provided a TSR of 4.5% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 12% endured over half a decade. It could well be that the business is stabilizing. Before deciding if you like the current share price, check how CRCC High-Tech Equipment scores on these 3 valuation metrics.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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