Hap Seng Consolidated Berhad (KLSE:HAPSENG) sheds RM423m, company earnings and investor returns have been trending downwards for past five years

For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term Hap Seng Consolidated Berhad (KLSE:HAPSENG) shareholders for doubting their decision to hold, with the stock down 56% over a half decade.

Since Hap Seng Consolidated Berhad has shed RM423m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Hap Seng Consolidated Berhad

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...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years over which the share price declined, Hap Seng Consolidated Berhad's earnings per share (EPS) dropped by 6.9% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 15% per year, over the period. This implies that the market was previously too optimistic about the stock.

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

Dive deeper into Hap Seng Consolidated Berhad's key metrics by checking this interactive graph of Hap Seng Consolidated Berhad's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Hap Seng Consolidated Berhad the TSR over the last 5 years was -46%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 13% in the last year, Hap Seng Consolidated Berhad shareholders lost 5.5% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 8% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Hap Seng Consolidated Berhad (of which 1 shouldn't be ignored!) you should know about.

Of course Hap Seng Consolidated Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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.