For many investors, the main point of stock selection is to generate higher returns than the overall market. However, the risk in stock picking is that you are likely to buy companies that are underperforming.I regret that it has been a long time since I last reported. Daian Gene Co., Ltd. (SZSE:002030) shareholders have had a similar experience, with the share price down 59% over three years, compared to a market decline of around 22%. And the ride has been even less smooth these days compared to last year, when the price was 45% cheaper. Furthermore, about a quarter of them have fallen by 17%. That's not much fun for the holder. Of course, this stock price movement may have been influenced by his 8.8% decline in the overall market over the period.
More encouragingly, the company has increased its market capitalization by CA$449m in the past 7 days. Let's see if he can identify the cause of the three-year loss for shareholders.
Check out our latest analysis for Daan Gene.
While there is no denying that markets are sometimes efficient, prices do not always reflect underlying company performance. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
Daan Gene has seen its EPS decline at a compound rate of 18% per year over the past three years. The 26% share price decline is actually more steep than the EPS slippage. So it seems like the market used to have too much confidence in this business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Daan Gene's key metrics by checking out this interactive graph of Daan Gene's earnings, revenue and cash flow.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). Whereas the price/earnings ratio only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. For Daan Gene, the TSR for the last 3 years is -48%. This exceeds the stock return mentioned earlier. This is primarily due to dividend payments.
different perspective
While the overall market lost around 17% in 12 months, Daan Gene shareholders' losses were even worse, losing 37% (even including dividends). However, it is also possible that the stock price is simply being affected by broader market fluctuations. It might be worth looking at the basics in case a good opportunity presents itself. Long-term investors won't be too upset since they would have made a 9% return each year over five years. The recent selloff could be an opportunity, so it might be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track stock performance over the long term. However, to better understand Daan Gen, you need to consider many other factors.For example, taking risks – Daan Gene is 3 warning signs (and an important one) that I think you should know about.
of course, You may find a great investment if you look elsewhere. So take a look at this free A list of companies with expected revenue growth.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis to see if Daan Gene is potentially overvalued or undervalued, including: Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
