Investors three-year losses continue as Anhui Wanwei Updated High-Tech Material IndustryLtd (SHSE:600063) dips a further 6.2% this week, earnings continue to decline

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Anhui Wanwei Updated High-Tech Material Industry Co.,Ltd (SHSE:600063) shareholders have had that experience, with the share price dropping 48% in three years, versus a market decline of about 31%. And more recent buyers are having a tough time too, with a drop of 37% in the last year. Furthermore, it's down 24% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

Since Anhui Wanwei Updated High-Tech Material IndustryLtd has shed CN¥453m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Anhui Wanwei Updated High-Tech Material IndustryLtd

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 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 three years that the share price fell, Anhui Wanwei Updated High-Tech Material IndustryLtd's earnings per share (EPS) dropped by 31% each year. In comparison the 19% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

It might be well worthwhile taking a look at our free report on Anhui Wanwei Updated High-Tech Material IndustryLtd's earnings, revenue and cash flow.

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, Anhui Wanwei Updated High-Tech Material IndustryLtd's TSR for the last 3 years was -44%, 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 Anhui Wanwei Updated High-Tech Material IndustryLtd shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Anhui Wanwei Updated High-Tech Material IndustryLtd better, we need to consider many other factors. Take risks, for example - Anhui Wanwei Updated High-Tech Material IndustryLtd has 3 warning signs we think you should be aware of.

We will like Anhui Wanwei Updated High-Tech Material IndustryLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.