The three-year underlying earnings growth at Tongdao Liepin Group (HKG:6100) is promising, but the shareholders are still in the red over that time

By
Simply Wall St
Published
January 09, 2022
SEHK:6100
Source: Shutterstock

Tongdao Liepin Group (HKG:6100) shareholders will doubtless be very grateful to see the share price up 58% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 33% in the last three years, significantly under-performing the market.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Tongdao Liepin Group

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Although the share price is down over three years, Tongdao Liepin Group actually managed to grow EPS by 87% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). 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.

We note that, in three years, revenue has actually grown at a 25% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Tongdao Liepin Group further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
SEHK:6100 Earnings and Revenue Growth January 9th 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Tongdao Liepin Group stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

The last twelve months weren't great for Tongdao Liepin Group shares, which performed worse than the market, costing holders 12%. The market shed around 9.5%, no doubt weighing on the stock price. Unfortunately, the longer term story isn't pretty, with investment losses running at 10% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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. To that end, you should be aware of the 1 warning sign we've spotted with Tongdao Liepin Group .

Tongdao Liepin Group is not the only stock that insiders are buying. For those who like to find winning investments this free list 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.

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