While it may not be enough for some shareholders, we think it is good to see the China Resources Beer (Holdings) Company Limited (HKG:291) share price up 20% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 42% in the last three years, falling well short of the market return.
While the last three years has been tough for China Resources Beer (Holdings) 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.
See our latest analysis for China Resources Beer (Holdings)
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 unfortunate three years of share price decline, China Resources Beer (Holdings) actually saw its earnings per share (EPS) improve by 1.1% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
It looks to us like the market was probably too optimistic around growth three years ago. But it's possible a look at other metrics will be enlightening.
Revenue is actually up 5.4% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching China Resources Beer (Holdings) more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
China Resources Beer (Holdings) is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Resources Beer (Holdings), it has a TSR of -38% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 41% in the last year, China Resources Beer (Holdings) shareholders lost 15% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.7% over the last half decade. 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. Before forming an opinion on China Resources Beer (Holdings) you might want to consider these 3 valuation metrics.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.