Yahoo Finanza Did You Manage To Avoid Cosmos Machinery Enterprises' (HKG:118) Devastating 71% Share Price Drop?
Cosmos Machinery Enterprises Limited (HKG:118) shareholders should be happy to see the share price up 27% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 71% in that time. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.
See our latest analysis for Cosmos Machinery Enterprises
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 five years of share price growth, Cosmos Machinery Enterprises moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
Revenue is actually up 1.1% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Cosmos Machinery Enterprises's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Cosmos Machinery Enterprises's TSR, which was a 70% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
We regret to report that Cosmos Machinery Enterprises shareholders are down 34% for the year. Unfortunately, that's worse than the broader market decline of 8.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 21% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Cosmos Machinery Enterprises better, we need to consider many other factors. Take risks, for example - Cosmos Machinery Enterprises has 3 warning signs we think you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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This article by Simply Wall St is general in nature. 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. Thank you for reading.
