Shareholders in AVIC Industry-Finance Holdings (SHSE:600705) have lost 52%, as stock drops 3.8% this past week

We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the AVIC Industry-Finance Holdings Co., Ltd. (SHSE:600705) share price is a whole 58% lower. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 41%. Shareholders have had an even rougher run lately, with the share price down 26% in the last 90 days.

Since AVIC Industry-Finance Holdings has shed CN¥794m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for AVIC Industry-Finance Holdings

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. 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.

In the last half decade AVIC Industry-Finance Holdings saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on AVIC Industry-Finance Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, AVIC Industry-Finance Holdings' TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that AVIC Industry-Finance Holdings shareholders are down 40% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand AVIC Industry-Finance Holdings better, we need to consider many other factors. Even so, be aware that AVIC Industry-Finance Holdings is showing 1 warning sign in our investment analysis , 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