The five-year shareholder returns and company earnings persist lower as Hongta Securities (SHSE:601236) stock falls a further 3.4% in past week

Hongta Securities Co., Ltd. (SHSE:601236) shareholders should be happy to see the share price up 26% in the last quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 47% in that time, significantly under-performing the market.

With the stock having lost 3.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Hongta Securities

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Looking back five years, both Hongta Securities' share price and EPS declined; the latter at a rate of 5.8% per year. This reduction in EPS is less than the 12% annual reduction in the share price. So it seems the market was too confident about the business, in the past. Of course, with a P/E ratio of 52.54, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Hongta Securities has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Hongta Securities will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hongta Securities the TSR over the last 5 years was -38%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Hongta Securities has rewarded shareholders with a total shareholder return of 8.3% in the last twelve months. That's including the dividend. That certainly beats the loss of about 7% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Hongta Securities better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Hongta Securities you should be aware of, and 1 of them can't be ignored.

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.