Hongrun Construction Group (SZSE:002062) sheds CN¥550m, company earnings and investor returns have been trending downwards for past year

It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Hongrun Construction Group Co., Ltd. (SZSE:002062) share price is down 33% in the last year. That contrasts poorly with the market decline of 10%. At least the damage isn't so bad if you look at the last three years, since the stock is down 18% in that time. More recently, the share price has dropped a further 16% in a month.

If the past week is anything to go by, investor sentiment for Hongrun Construction Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Hongrun Construction Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Hongrun Construction Group had to report a 22% decline in EPS over the last year. This reduction in EPS is not as bad as the 33% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Hongrun Construction Group's key metrics by checking this interactive graph of Hongrun Construction Group'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Hongrun Construction Group's TSR for the last 1 year was -31%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 10% in the twelve months, Hongrun Construction Group shareholders did even worse, losing 31% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hongrun Construction Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for Hongrun Construction Group that you should be aware of before investing here.

We will like Hongrun Construction Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.