China Resources Building Materials Technology Holdings (HKG:1313) stock falls 7.5% in past week as five-year earnings and shareholder returns continue downward trend

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Imagine if you held China Resources Building Materials Technology Holdings Limited (HKG:1313) for half a decade as the share price tanked 83%. And it's not just long term holders hurting, because the stock is down 63% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 24% in thirty days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Since China Resources Building Materials Technology Holdings has shed HK$698m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for China Resources Building Materials Technology Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years over which the share price declined, China Resources Building Materials Technology Holdings' earnings per share (EPS) dropped by 37% each year. This fall in the EPS is worse than the 30% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on China Resources Building Materials Technology Holdings' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for China Resources Building Materials Technology Holdings the TSR over the last 5 years was -78%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Resources Building Materials Technology Holdings shareholders are down 62% for the year (even including dividends), but the market itself is up 1.3%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. 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 - China Resources Building Materials Technology Holdings has 2 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued 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 Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com