Market is not liking Huaxin Cement's (SHSE:600801) earnings decline as stock retreats 3.2% this week

It can certainly be frustrating when a stock does not perform as hoped. But no-one can make money on every call, especially in a declining market. The Huaxin Cement Co., Ltd. (SHSE:600801) is down 28% over three years, but the total shareholder return is -17% once you include the dividend. That's better than the market which declined 23% over the last three years.

With the stock having lost 3.2% 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 Huaxin Cement

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the three years that the share price fell, Huaxin Cement's earnings per share (EPS) dropped by 23% each year. In comparison the 10% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Huaxin Cement has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Huaxin Cement, it has a TSR of -17% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Huaxin Cement shareholders have received a total shareholder return of 16% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Huaxin Cement better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Huaxin Cement 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.