Shanghai Chinafortune's (SHSE:600621) earnings have declined over three years, contributing to shareholders 20% loss

One of the frustrations of investing is when a stock goes down. But no-one can make money on every call, especially in a declining market. The Shanghai Chinafortune Co., Ltd. (SHSE:600621) is down 21% over three years, but the total shareholder return is -20% once you include the dividend. That's better than the market which declined 26% over the last three years. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 9.2% in the same timeframe.

On a more encouraging note the company has added CN¥541m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for Shanghai Chinafortune

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. 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.

Shanghai Chinafortune saw its EPS decline at a compound rate of 19% per year, over the last three years. In comparison the 8% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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 Shanghai Chinafortune's key metrics by checking this interactive graph of Shanghai Chinafortune's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Shanghai Chinafortune shareholders have received a total shareholder return of 6.4% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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 Shanghai Chinafortune (1 shouldn't be ignored!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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