The past three-year earnings decline for International Cement Group (SGX:KUO) likely explains shareholders long-term losses

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term International Cement Group Ltd. (SGX:KUO) shareholders have had that experience, with the share price dropping 38% in three years, versus a market return of about 26%.

While the last three years has been tough for International Cement Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

International Cement Group saw its EPS decline at a compound rate of 83% per year, over the last three years. The recent extraordinary items made their mark on profits. In comparison the 15% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 764.63.

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

Dive deeper into International Cement Group's key metrics by checking this interactive graph of International Cement Group's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 21% in the last year, International Cement Group shareholders lost 5.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand International Cement Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for International Cement Group (of which 1 is concerning!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singaporean exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.