Optimism around Zhaojin Mining Industry (HKG:1818) delivering new earnings growth may be shrinking as stock declines 9.8% this past week

By
Simply Wall St
Published
May 11, 2022
SEHK:1818
Source: Shutterstock

It's easy to feel disappointed if you buy a stock that goes down. But often it is not a reflection of the fundamental business performance. The Zhaojin Mining Industry Company Limited (HKG:1818) is down 16% over a year, but the total shareholder return is -15% once you include the dividend. And that total return actually beats the market decline of 24%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 7.2% in three years. It's down 19% in about a month. We do note, however, that the broader market is down 8.6% in that period, and this may have weighed on the share price.

Since Zhaojin Mining Industry has shed CN¥2.3b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Zhaojin Mining Industry

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).

Unhappily, Zhaojin Mining Industry had to report a 92% decline in EPS over the last year. The share price fall of 16% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 193.17, it's fair to say the market sees an EPS rebound on the cards.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
SEHK:1818 Earnings Per Share Growth May 11th 2022

Dive deeper into Zhaojin Mining Industry's key metrics by checking this interactive graph of Zhaojin Mining Industry's earnings, revenue and cash flow.

A Different Perspective

While it's never nice to take a loss, Zhaojin Mining Industry shareholders can take comfort that their trailing twelve month loss of 15% wasn't as bad as the market loss of around 24%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 0.2% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Zhaojin Mining Industry better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Zhaojin Mining Industry , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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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