Imagine Owning CRCC High-Tech Equipment (HKG:1786) And Trying To Stomach The 70% Share Price Drop

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term CRCC High-Tech Equipment Corporation Limited (HKG:1786) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 70% share price collapse, in that time. The more recent news is of little comfort, with the share price down 47% in a year. The falls have accelerated recently, with the share price down 10% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.

View our latest analysis for CRCC High-Tech Equipment

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, CRCC High-Tech Equipment's earnings per share (EPS) dropped by 36% each year. This change in EPS is reasonably close to the 33% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for CRCC High-Tech Equipment the TSR over the last 3 years was -68%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CRCC High-Tech Equipment shareholders are down 46% for the year (even including dividends) , falling short of the market return. The market shed around 17%, no doubt weighing on the stock price. The three-year loss of 31% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for CRCC High-Tech Equipment you should know about.

But note: CRCC High-Tech Equipment may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.