PetroChina (HKG:857) Share Prices Have Dropped 54% In The Last Three Years

PetroChina Company Limited (HKG:857) shareholders should be happy to see the share price up 13% in the last month. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 54% in the last three years, significantly under-performing the market.

View our latest analysis for PetroChina

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

PetroChina saw its EPS decline at a compound rate of 6.5% per year, over the last three years. The share price decline of 23% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

This free interactive report on PetroChina's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, PetroChina's TSR for the last 3 years was -47%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

PetroChina shareholders are down 27% for the year (even including dividends), but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. 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. Take risks, for example - PetroChina has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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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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