Metro Land Corporation Ltd. (SHSE:600683) shareholders should be happy to see the share price up 15% in the last month. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 17% in that half decade.
The recent uptick of 12% could be a positive sign of things to come, so let's take a look at historical fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years over which the share price declined, Metro Land's earnings per share (EPS) dropped by 40% each year. This fall in the EPS is worse than the 4% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 117.07 suggests that shareholders believe earnings will grow in the years ahead.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Metro Land's key metrics by checking this interactive graph of Metro Land's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Metro Land's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Metro Land shareholders, and that cash payout explains why its total shareholder loss of 5.8%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Although it hurts that Metro Land returned a loss of 7.7% in the last twelve months, the broader market was actually worse, returning a loss of 12%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 1.1% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand Metro Land better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Metro Land you should be aware of, and 2 of them don't sit too well with us.
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 Chinese exchanges.
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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.