Chongqing Machinery & Electric's (HKG:2722) Shareholders Are Down 30% On Their Shares

While not a mind-blowing move, it is good to see that the Chongqing Machinery & Electric Co., Ltd. (HKG:2722) share price has gained 27% in the last three months. But if you look at the last five years the returns have not been good. After all, the share price is down 30% in that time, significantly under-performing the market.

View our latest analysis for Chongqing Machinery & Electric

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. 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.

During the five years over which the share price declined, Chongqing Machinery & Electric's earnings per share (EPS) dropped by 23% each year. The share price decline of 7% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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. It might be well worthwhile taking a look at our free report on Chongqing Machinery & Electric's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Chongqing Machinery & Electric the TSR over the last 5 years was -13%, 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

Chongqing Machinery & Electric shareholders gained a total return of 13% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 2% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Chongqing Machinery & Electric better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Chongqing Machinery & Electric (including 2 which shouldn't be ignored) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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