It’s easy to feel disappointed if you buy a stock that goes down. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. So while the Xinte Energy Co., Ltd. (HKG:1799) share price is down 14% in the last year, the total return to shareholders (which includes dividends) was -11%. That’s better than the market which returned -14% over the last year. At least the damage isn’t so bad if you look at the last three years, since the stock is down 4.9% in that time. On top of that, the share price has dropped a further 9.4% in a month. However, we note the price may have been impacted by the broader market, which is down 11% in the same time period.
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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Even though the Xinte Energy share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth. It seems quite likely that the market was expecting higher growth from the stock. But other metrics might shed some light on why the share price is down.
Xinte Energy’s revenue is actually up 5.5% over the last year. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Take a more thorough look at Xinte Energy’s financial health with this free report on its balance sheet.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Xinte Energy the TSR over the last year was -11%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We can sympathize with Xinte Energy about their 11% loss for the year ( including dividends), but the silver lining is that the broader market return was worse, at around -14%. Longer term investors wouldn’t be so upset, since they would have made 0.7%, each year, over three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. Before forming an opinion on Xinte Energy you might want to consider these 3 valuation metrics.
We will like Xinte Energy better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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.