Grand Baoxin Auto Group (HKG:1293) Share Prices Have Dropped 83% In The Last Five Years

Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Grand Baoxin Auto Group Limited (HKG:1293) for five whole years - as the share price tanked 83%. And it's not just long term holders hurting, because the stock is down 49% in the last year. Shareholders have had an even rougher run lately, with the share price down 35% in the last 90 days.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

See our latest analysis for Grand Baoxin Auto Group

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. 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.

Looking back five years, both Grand Baoxin Auto Group's share price and EPS declined; the latter at a rate of 8.2% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 30% per year, over the period. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 4.27.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Grand Baoxin Auto Group shareholders are down 49% for the year, but the market itself is up 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 13% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Grand Baoxin Auto Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Grand Baoxin Auto Group (1 is a bit unpleasant) that you should be aware of.

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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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