Reflecting on China Maple Leaf Educational Systems' (HKG:1317) Share Price Returns Over The Last Three Years

Investing in stocks inevitably means buying into some companies that perform poorly. Long term China Maple Leaf Educational Systems Limited (HKG:1317) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 56% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 29% in the last year. Furthermore, it's down 12% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

View our latest analysis for China Maple Leaf Educational Systems

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. 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 the unfortunate three years of share price decline, China Maple Leaf Educational Systems actually saw its earnings per share (EPS) improve by 3.6% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.

Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching China Maple Leaf Educational Systems more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on China Maple Leaf Educational Systems

What about the Total Shareholder Return (TSR)?

We've already covered China Maple Leaf Educational Systems' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that China Maple Leaf Educational Systems' TSR, which was a 53% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 10% in the last year, China Maple Leaf Educational Systems shareholders lost 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for China Maple Leaf Educational Systems that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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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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. 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.
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