While Ping An Insurance (Group) Company of China, Ltd. (HKG:2318) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. Looking further back, the stock has generated good profits over five years. Its return of 97% has certainly bested the market return!
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Ping An Insurance (Group) Company of China achieved compound earnings per share (EPS) growth of 22% per year. This EPS growth is higher than the 15% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.28.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Ping An Insurance (Group) Company of China has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Ping An Insurance (Group) Company of China will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ping An Insurance (Group) Company of China the TSR over the last 5 years was 124%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 17% in the last year, Ping An Insurance (Group) Company of China shareholders lost 12% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Ping An Insurance (Group) Company of China (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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