If You Had Bought China Taiping Insurance Holdings' (HKG:966) Shares Three Years Ago You Would Be Down 55%

While not a mind-blowing move, it is good to see that the China Taiping Insurance Holdings Company Limited (HKG:966) share price has gained 27% in the last three months. But that is small recompense for the exasperating returns over three years. In that time, the share price dropped 55%. So it's good to see it climbing back up. Perhaps the company has turned over a new leaf.

See our latest analysis for China Taiping Insurance Holdings

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).

Although the share price is down over three years, China Taiping Insurance Holdings actually managed to grow EPS by 9.8% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

The modest 2.0% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 9.8% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching China Taiping Insurance Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

China Taiping Insurance Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for China Taiping Insurance Holdings in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 20% in the last year, China Taiping Insurance Holdings shareholders lost 11% (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. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand China Taiping Insurance Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China Taiping Insurance Holdings you should know about.

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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