It’s impossible to avoid making mistakes when investing for the long term. But a really big loss can really drag down an entire portfolio. So, take a moment to sympathize with long-term shareholders of China Tourism Group Duty Free Company Ltd (SHSE:601888), who have seen their share price plummet 76% in three years. To say the least, it may raise serious questions about the merits of the original decision to buy the stock. And recent buyers have struggled as well, with the stock down 45% in the past year. The decline has accelerated recently, with the share price down 21% in the past three months.
Now let’s take a look at whether the company’s long term performance is in line with the progress of its underlying business.
Check out our latest analysis for China Tourism Group Duty Free
To quote Buffett, “Ships will sail around the world, but the Flat Earth Society will thrive. There will continue to be a wide disconnect between price and value in the marketplace…” One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years that the stock price declined, China Tourism Group Duty Free’s earnings per share (EPS) fell 11% each year. The 38% decline in the stock price is actually steeper than the decline in EPS. Therefore, it is likely that the decline in EPS disappointed the market and caused investors to hesitate to buy.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
SHSE:601888 Earnings per Share Growth June 18, 2024
SHSE:601888 Earnings per Share Growth June 18, 2024We know that China Tourism Group Duty Free has improved its profits recently, but can it grow revenue? Check out this free report showing analyst profit forecasts.
A different perspective
With the broader market down around 15% over the twelve months, China Tourism Group Duty Free shareholders have done worse, suffering a loss of 43% (even including dividends). That being said, it’s inevitable that some stocks will become oversold in a falling market. The key is to keep an eye on the fundamental trends. Unfortunately, last year’s performance capped a bad run, with shareholders facing a 3% annualized loss over five years. We know Baron Rothschild says investors should ‘buy when the blood is flowing’, but we caution that investors should first make sure they are buying a quality business. While it’s well worth considering the different effects that market conditions can have on share prices, there are some factors that are even more important than that. For example, risk taking. China Tourism Group Duty Free has 1 warning sign we think you should be aware of.
If you’re like me, then you won’t want to miss this free list of undervalued small stocks that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on China exchanges.
Valuation is complicated, but we can help make it simple.
Check out our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financial position and more, to see if China Tourism Group Duty Free is possibly overvalued or undervalued.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
Valuation is complicated, but we can help make it simple.
Check out our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financial position and more, to see if China Tourism Group Duty Free is possibly overvalued or undervalued.
View your free analysis
Have something to say about this article? If you have any questions about the content, please contact us directly or email us at editorial-team@simplywallst.com.
