Volatility 101: Should China Travel International Investment Hong Kong (HKG:308) Shares Have Dropped 50%?

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the China Travel International Investment Hong Kong Limited (HKG:308) share price is down 50% in the last year. That's well bellow the market return of -3.0%. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 47%) in that time. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Check out our latest analysis for China Travel International Investment Hong Kong

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 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.

Unhappily, China Travel International Investment Hong Kong had to report a 37% decline in EPS over the last year. The share price decline of 50% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 9.08 also points to the negative market sentiment.

You can see how EPS has changed over time in the image below.

Dive deeper into China Travel International Investment Hong Kong's key metrics by checking this interactive graph of China Travel International Investment Hong Kong's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered China Travel International Investment Hong Kong's share price action, but we should also mention its total shareholder return (TSR). 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 China Travel International Investment Hong Kong's TSR, which was a 48% drop over the last year, was not as bad as the share price return.

A Different Perspective

We regret to report that China Travel International Investment Hong Kong shareholders are down 48% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 3.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.2% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Importantly, we haven't analysed China Travel International Investment Hong Kong's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

Of course China Travel International Investment Hong Kong may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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 editorial-team@simplywallst.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.