Luxin Venture Capital Group’s (SHSE:600783 five-year decrease in earnings delivers investors with a 43% loss

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Luxin Venture Capital Group Co., Ltd. (SHSE:600783), since the last five years saw the share price fall 47%. We also note that the stock has performed poorly over the last year, with the share price down 24%. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

Given the past week has been tough on shareholders, let’s investigate the fundamentals and see what we can learn.

See our latest analysis for Luxin Venture Capital Group

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.

Looking back five years, both Luxin Venture Capital Group’s share price and EPS declined; the latter at a rate of 44% per year. This fall in the EPS is worse than the 12% 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 635.95 suggests that shareholders believe earnings will grow in the years ahead.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Luxin Venture Capital Group’s key metrics by checking this interactive graph of Luxin Venture Capital Group’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Luxin Venture Capital Group’s TSR for the last 5 years was -43%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Luxin Venture Capital Group shareholders are down 23% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example – Luxin Venture Capital Group has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com