China Railway Construction (SHSE:601186) shareholders have endured a 17% loss from investing in the stock a year ago

It's understandable if you feel frustrated when a stock you own sees a lower share price. But often it is not a reflection of the fundamental business performance. The China Railway Construction Corporation Limited (SHSE:601186) is down 19% over a year, but the total shareholder return is -17% once you include the dividend. That's better than the market which declined 17% over the last year. On the bright side, the stock is actually up 14% in the last three years.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for China Railway Construction

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Unfortunately China Railway Construction reported an EPS drop of 2.6% for the last year. The share price decline of 19% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The less favorable sentiment is reflected in its current P/E ratio of 4.77.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into China Railway Construction's key metrics by checking this interactive graph of China Railway Construction's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Railway Construction's TSR for the last 1 year was -17%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

The total return of 17% received by China Railway Construction shareholders over the last year isn't far from the market return of -17%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 1.0% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. It's always interesting to track share price performance over the longer term. But to understand China Railway Construction better, we need to consider many other factors. Take risks, for example - China Railway Construction has 2 warning signs (and 1 which is concerning) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com