China Automotive Systems, Inc. (NASDAQ:CAAS) shareholders might be concerned after seeing the share price drop 21% in the last quarter. On the other hand, over the last twelve months the stock has delivered rather impressive returns. During that period, the share price soared a full 241%. So it is important to view the recent reduction in price through that lense. More important, going forward, is how the business itself is going.
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.
Over the last twelve months China Automotive Systems went from profitable to unprofitable. While some may see this as temporary, we’re a skeptical bunch, and so we’re a little surprised to see the share price go up. We might get a clue to explain the share price move by looking to other metrics.
China Automotive Systems’ revenue actually dropped 12% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
It’s good to see that China Automotive Systems has rewarded shareholders with a total shareholder return of 241% in the last twelve months. That’s better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we’ve discovered 1 warning sign for China Automotive Systems that you should be aware of before investing here.
We will like China Automotive Systems better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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