BAIC Motor (HKG: 1958) stock prices have fallen 57% in the past three years

While not a mind-boggling decision, it’s good to see that the BAIC Motor Corporation Limited (HKG: 1958) The stock price has gained 15% in the past three months. But that doesn’t change the fact that the returns of the past three years have been disappointing. During this period, the share price fell 57%. The improvement can therefore be a real relief for some. The increase brings hope, but the reversals are often precarious.

Check out our latest review for BAIC Motor

To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ‘One way to look at how market sentiment has changed over time is to look at the interaction between price. a company’s stock and earnings per share (EPS).

During the three unfortunate years of declining stock prices, BAIC Motor has seen its earnings per share (EPS) improve by 3.2% per year. Considering the reaction of the share price, one would think that EPS is not a good indicator of the performance of the company during the period (possibly due to a loss or a one-time gain). On the other hand, growth expectations may have been unreasonable in the past.

It’s pretty reasonable to suspect that the market was previously bullish on the stock and has since moderated expectations. But it is possible that a look at other measures is enlightening.

Income is actually up 8.5% over three years, so the decline in the stock price doesn’t appear to be income dependent either. It is probably worth investigating BAIC Motor further; although we may miss something in this analysis, there could also be an opportunity.

The company’s income and profits (over time) are shown in the image below (click to see exact numbers).

SEHK: 1958 Profit and Revenue Growth July 6, 2021

BAIC Motor is well known to investors, and many smart analysts have attempted to predict future profit levels. You can see what analysts are predicting for BAIC Motor in this interactive graph of future profit estimates.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. In the case of BAIC Motor, it has a TSR of -51% for the past 3 years. This exceeds the return on its share price that we mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.

A different perspective

BAIC Motor shareholders are down 18% on the year (including dividends), but the market itself is up 20%. Even good stock prices sometimes drop, but we want to see improvements in the fundamentals of a company, before we get too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given it was worse than the 7% annualized loss over the past five years. Generally speaking, long-term weakness in stock prices can be a bad sign, although contrarian investors may want to seek the stock in hopes of a rally. It is always interesting to follow the evolution of stock prices over the long term. But to understand BAIC Motor better, there are many other factors that we need to take into account. For example, we discovered 1 warning sign for BAIC engine which you should know before investing here.

But beware : BAIC Motor may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the Hong Kong stock exchanges.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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About Frances R. Smith

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