Power Construction Corporation of China (SHSE:601669) investors are sitting on a loss of 28% if they invested three years ago

Power Construction Corporation of China, Ltd (SHSE:601669) shareholders should be happy to see the share price up 25% in the last month. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 32% in the last three years, falling well short of the market return.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for Power Construction Corporation of China

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).

During the unfortunate three years of share price decline, Power Construction Corporation of China actually saw its earnings per share (EPS) improve by 11% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that, in three years, revenue has actually grown at a 5.3% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Power Construction Corporation of China more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. So it makes a lot of sense to check out what analysts think Power Construction Corporation of China will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Power Construction Corporation of China, it has a TSR of -28% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Power Construction Corporation of China provided a TSR of 9.6% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 6%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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 2 warning signs for Power Construction Corporation of China (1 shouldn't be ignored!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.