It’s normal to be annoyed when the price of the stock you own goes down. But often this does not reflect the fundamental performance of the company. The China Postal Savings Bank Co., Ltd. (HKG:1658) is down 14% YoY, but the total shareholder return is -10% once you include the dividend. And that total return actually beats the 21% market decline. Longer-term investors are faring much better, as the stock price has risen 9.5% in three years. Over the past ninety days, we’ve seen the stock price drop 16%.
With that in mind, it’s worth seeing whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.
Check out our latest analysis for Postal Savings Bank of China
To paraphrase Benjamin Graham: in the short term, the market is a voting machine, but in the long term, it is a weighing machine. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
In the unfortunate twelve months in which the Postal Savings Bank of China share price fell, it actually saw its earnings per share (EPS) improve by 12%. Of course, the situation could betray the previous excess of optimism regarding growth.
It’s fair to say that the stock price doesn’t seem to reflect EPS growth. It is therefore easy to justify a look at other measures.
The Postal Savings Bank of China’s dividend looks healthy to us, so we doubt yield is a concern for the market. From what we can see, earnings are pretty flat, which doesn’t really explain the stock price drop. Unless, of course, the market expects higher earnings.
You can see how earnings and income have changed over time below (find out the exact values by clicking on the image).
The Postal Savings Bank of China is well known to investors and many smart analysts have tried to predict future earnings levels. So it makes a lot of sense to check out what analysts think the Postal Savings Bank of China will earn in the future (free analyst consensus estimates)
What about dividends?
In addition to measuring share price performance, investors should also consider total shareholder return (TSR). TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. In the case of the Postal Savings Bank of China, it has a TSR of -10% for the last year. This exceeds the performance of its share price that we mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
While it hurts that the Postal Savings Bank of China posted a 10% loss over the past twelve months, the broader market was actually worse, posting a 21% loss. Longer-term investors wouldn’t be so upset, as they would have gained 6%, every year, over five years. The company may only face short-term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. For example, we found 1 warning sign for Postal Savings Bank of China which you should be aware of before investing here.
If you’re like me, then you not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on HK exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.