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February 27, 2024
PI Global Investments
Infrastructure

CK Infrastructure Holdings’ (HKG:1038) earnings have declined over five years, contributing to shareholders 7.6% loss


CK Infrastructure Holdings Limited (HKG:1038) shareholders should be happy to see the share price up 19% in the last quarter. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 28% in that half decade.

While the last five years has been tough for CK Infrastructure Holdings shareholders, this past week has shown signs of promise. So let’s look at the longer term fundamentals and see if they’ve been the driver of the negative returns.

View our latest analysis for CK Infrastructure Holdings

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.

Looking back five years, both CK Infrastructure Holdings’ share price and EPS declined; the latter at a rate of 6.4% per year. In this case, the EPS change is really very close to the share price drop of 6% a year. This implies that the market has had a fairly steady view of the stock. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SEHK:1038 Earnings Per Share Growth January 17th 2024

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. Whereas the share price return 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CK Infrastructure Holdings’ TSR for the last 5 years was -7.6%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s good to see that CK Infrastructure Holdings has rewarded shareholders with a total shareholder return of 7.7% in the last twelve months. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 1.5% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 CK Infrastructure Holdings that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

Valuation is complex, but we’re helping make it simple.

Find out whether CK Infrastructure Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.



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