In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term CNFinance Holdings Limited (NYSE:CNF) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 49%. The falls have accelerated recently, with the share price down 15% in the last three months. Of course, this share price action may well have been influenced by the 9.2% decline in the broader market, throughout the period.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, CNFinance Holdings’ earnings per share (EPS) dropped by 59% each year. In comparison the 18% compound annual share price decline isn’t as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment — or it may have previously priced some of the drop in.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on CNFinance Holdings’ earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren’t great for CNFinance Holdings shares, which performed worse than the market, costing holders 11%. Meanwhile, the broader market slid about 6.7%, likely weighing on the stock. However, the loss over the last year isn’t as bad as the 13% per annum loss investors have suffered over the last three years. We’d need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that CNFinance Holdings is showing 3 warning signs in our investment analysis , and 1 of those shouldn’t be ignored…
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.