Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Investors in Anli International Co., Ltd. (GTSM:5223) have tasted that bitter downside in the last year, as the share price dropped 26%. That falls noticeably short of the market return of around 14%. Because Anli International hasn’t been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Anli International share price fell, it actually saw its earnings per share (EPS) improve by 6.5%. Of course, the situation might betray previous over-optimism about growth.
The divergence between the EPS and the share price is quite notable, during the year. So it’s well worth checking out some other metrics, too.
Anli International’s dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn’t seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Anli International’s balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Anli International, it has a TSR of -22% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While Anli International shareholders are down 22% for the year (even including dividends) , the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 19% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 4 warning signs for Anli International that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
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