In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn’t blame long term PetroChina Company Limited (HKG:857) shareholders for doubting their decision to hold, with the stock down 33% over a half decade. There was little comfort for shareholders in the last week as the price declined a further 1.3%.
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…’ 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).
Looking back five years, both PetroChina’s share price and EPS declined; the latter at a rate of 15% per year. The share price decline of 7.8% per year isn’t as bad as the EPS decline. So investors might expect EPS to bounce back — or they may have previously foreseen the EPS decline.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that PetroChina has improved its bottom line lately, but is it going to grow revenue? Check if analysts think PetroChina will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, PetroChina’s TSR for the last 5 years was -24%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Although it hurts that PetroChina returned a loss of 2.5% in the last twelve months, the broader market was actually worse, returning a loss of 9.5%. What is more upsetting is the 5.4% per annum loss investors have suffered over the last half decade. This sort of share price action isn’t particularly encouraging, but at least the losses are slowing. Keeping this in mind, a solid next step might be to take a look at PetroChina’s dividend track record. This free interactive graph is a great place to start.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.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 email@example.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.