Investing in stocks inevitably means buying into some companies that perform poorly. But long term Jiayuan International Group Limited (HKG:2768) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 56% drop in the share price over that period. The falls have accelerated recently, with the share price down 21% in the last three months.
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 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.
During the unfortunate three years of share price decline, Jiayuan International Group actually saw its earnings per share (EPS) improve by 2.6% per year. 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 pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it's possible a look at other metrics will be enlightening.
We note that, in three years, revenue has actually grown at a 38% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Jiayuan International Group further; while we may be missing something on this analysis, there might also be an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling Jiayuan International Group stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Jiayuan International Group's TSR for the last 3 years was -51%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Jiayuan International Group shareholders are up 4.3% for the year (even including dividends). Unfortunately this falls short of the market return of around 13%. The silver lining is that the recent rise is far preferable to the annual loss of 15% that shareholders have suffered over the last three years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Jiayuan International Group better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Jiayuan International Group you should be aware of.
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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