2.9% earnings growth over 3 years has not materialized into gains for Guangzhou Development Group (SHSE:600098) shareholders over that period

No-one enjoys it when they lose money on a stock. But no-one can make money on every call, especially in a declining market. While the Guangzhou Development Group Incorporated (SHSE:600098) share price is down 16% in the last three years, the total return to shareholders (which includes dividends) was -8.6%. That's better than the market which declined 31% over the last three years. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. But this could be related to the weak market, which is down 13% in the same period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Guangzhou Development Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate three years of share price decline, Guangzhou Development Group actually saw its earnings per share (EPS) improve by 8.9% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. It's good to see that Guangzhou Development Group has increased its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Guangzhou Development Group has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Guangzhou Development Group will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Guangzhou Development Group, it has a TSR of -8.6% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Guangzhou Development Group has rewarded shareholders with a total shareholder return of 1.6% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 2% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Guangzhou Development Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Guangzhou Development Group (of which 1 shouldn't be ignored!) 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.