China ZhongDi Dairy Holdings Company Limited (HKG:1492) shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 34% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
Check out our latest analysis for China ZhongDi Dairy Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years that the share price fell, China ZhongDi Dairy Holdings's earnings per share (EPS) dropped by 30% each year. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on China ZhongDi Dairy Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren't great for China ZhongDi Dairy Holdings shares, which performed worse than the market, costing holders 23%. The market shed around 7.3%, no doubt weighing on the stock price. Shareholders have lost 13% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before deciding if you like the current share price, check how China ZhongDi Dairy Holdings scores on these 3 valuation metrics.
For those who like to find winning investments this freelist of growing companies with recent insider purchasing, could be just the ticket.
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.