Shanghai M&G Stationery (SHSE:603899) sheds CN¥1.3b, company earnings and investor returns have been trending downwards for past three years

Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Shanghai M&G Stationery Inc. (SHSE:603899) shareholders. Sadly for them, the share price is down 53% in that time. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.

After losing 4.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Shanghai M&G Stationery

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 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.

Shanghai M&G Stationery saw its EPS decline at a compound rate of 0.3% per year, over the last three years. The share price decline of 22% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

This free interactive report on Shanghai M&G Stationery's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shanghai M&G Stationery the TSR over the last 3 years was -50%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 11% in the last year, Shanghai M&G Stationery shareholders lost 17% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Is Shanghai M&G Stationery cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Shanghai M&G Stationery 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 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.