Stock Analysis

The five-year shareholder returns and company earnings persist lower as Cosmo Lady (China) Holdings (HKG:2298) stock falls a further 11% in past week

SEHK:2298
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Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Cosmo Lady (China) Holdings Company Limited (HKG:2298) for five whole years - as the share price tanked 76%. The falls have accelerated recently, with the share price down 13% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Cosmo Lady (China) Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Cosmo Lady (China) Holdings' share price and EPS declined; the latter at a rate of 16% per year. This reduction in EPS is less than the 25% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 5.11 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
SEHK:2298 Earnings Per Share Growth November 21st 2024

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Cosmo Lady (China) Holdings' earnings, revenue and cash flow.

A Different Perspective

Cosmo Lady (China) Holdings shareholders are down 5.5% for the year (even including dividends), but the market itself is up 17%. 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 12% 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 Cosmo Lady (China) Holdings better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Cosmo Lady (China) Holdings you should be aware of, and 1 of them can't be ignored.

For those who like to find winning investments this free list of undervalued 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 Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.