International Cement Group (SGX:KUO) shareholders are in the red if they invested five years ago

Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both outperforming and underperforming stocks. So we wouldn’t blame in the long run Ciment International Group Ltd. (SGX: KUO) shareholders for doubting their decision to hold, the stock having fallen 44% in half a decade. And we doubt long-term believers are the only worried holders, as the stock price has fallen 29% in the last twelve months. Moreover, it fell by 15% in about a quarter. It’s not much fun for the holders.

It is worth assessing whether the economics of the company have evolved alongside these disappointing returns to shareholders, or whether there is some disparity between the two. So let’s just do that.

Check out our latest analysis for International Cement Group

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but simple way to examine the evolution of a company’s perception by the market is to compare the evolution of earnings per share (EPS) with the evolution of the share price.

In the unfortunate half-decade in which the share price fell, International Cement Group actually saw its earnings per share (EPS) improve by 49% annually. Given the stock price reaction, one might suspect that EPS is not a good indicator of the company’s performance over the period (perhaps due to a loss or a one-time gain). Alternatively, growth expectations may have been unreasonable in the past.

Due to the stark contrast between EPS growth rate and stock price growth, we are inclined to look to other metrics to understand the shift in market sentiment around the stock.

Unlike the stock price, earnings actually increased by one year over the five-year period. A closer look at revenue and earnings may or may not explain why the stock price is languishing; there might be an opportunity.

The company’s revenues and profits (over time) are shown in the image below (click to see exact figures).

earnings-and-revenue-growth

We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow its profits over the years. It might be interesting to take a look at our free report on results, turnover and cash flow of International Cement Group.

A different perspective

We regret to report that International Cement Group shareholders are down 29% for the year. Unfortunately, this is worse than the general market decline of 3.8%. That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance capped a bad run, with shareholders facing a total loss of 8% per year over five years. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors should first make sure they are buying a high quality company. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Even so, know that International Cement Group presents 2 warning signs in our investment analysis you should know…

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the market-weighted average returns of the stocks currently trading on the SG exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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