Zhejiang Expressway's (HKG:576) Shareholders Are Down 22% On Their Shares

While it may not be enough for some shareholders, we think it is good to see the Zhejiang Expressway Co., Ltd. (HKG:576) share price up 19% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 22% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

See our latest analysis for Zhejiang Expressway

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Zhejiang Expressway's earnings per share (EPS) dropped by 7.1% each year. This change in EPS is reasonably close to the 8% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. In the case of Zhejiang Expressway, it has a TSR of -6.7% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Zhejiang Expressway shareholders gained a total return of 6.3% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Expressway 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 Zhejiang Expressway (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

But note: Zhejiang Expressway may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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