Did Changing Sentiment Drive China Tianrui Automotive Interiors's (HKG:6162) Share Price Down By 22%?

While not a mind-blowing move, it is good to see that the China Tianrui Automotive Interiors Co., Ltd. (HKG:6162) share price has gained 14% in the last three months. But in truth the last year hasn't been good for the share price. In fact, the price has declined 22% in a year, falling short of the returns you could get by investing in an index fund.

Check out our latest analysis for China Tianrui Automotive Interiors

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate twelve months during which the China Tianrui Automotive Interiors share price fell, it actually saw its earnings per share (EPS) improve by 31%. It's quite possible that growth expectations may have been unreasonable in the past.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

We don't see any weakness in the China Tianrui Automotive Interiors's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Tianrui Automotive Interiors's TSR for the last year was -14%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Given that the market gained 9.9% in the last year, China Tianrui Automotive Interiors shareholders might be miffed that they lost 14% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 14% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand China Tianrui Automotive Interiors better, we need to consider many other factors. For example, we've discovered 5 warning signs for China Tianrui Automotive Interiors (2 are concerning!) that you should be aware of before investing here.

We will like China Tianrui Automotive Interiors 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 HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.