The three-year shareholder returns and company earnings persist lower as China International Capital (HKG:3908) stock falls a further 7.7% in past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term China International Capital Corporation Limited (HKG:3908) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 59% in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 47% lower in that time. The falls have accelerated recently, with the share price down 30% in the last three months.

Since China International Capital has shed HK$3.8b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for China International Capital

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

China International Capital saw its EPS decline at a compound rate of 5.1% per year, over the last three years. This reduction in EPS is slower than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 7.31.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

We regret to report that China International Capital shareholders are down 47% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 21%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. We realise that Baron Rothschild 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 business. Is China International Capital cheap compared to other companies? These 3 valuation measures might help you decide.

We will like China International Capital 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 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.