Oriental Pearl GroupLtd's (SHSE:600637) five-year decline in earnings translates into losses for shareholders

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Oriental Pearl Group Co.,Ltd. (SHSE:600637), since the last five years saw the share price fall 27%. In contrast, the stock price has popped 8.0% in the last thirty days.

While the last five years has been tough for Oriental Pearl GroupLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Oriental Pearl GroupLtd

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 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.

During the five years over which the share price declined, Oriental Pearl GroupLtd's earnings per share (EPS) dropped by 21% each year. This fall in the EPS is worse than the 6% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. The high P/E ratio of 49.82 suggests that shareholders believe earnings will grow in the years ahead.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized 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. It might be well worthwhile taking a look at our free report on Oriental Pearl GroupLtd's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Oriental Pearl GroupLtd the TSR over the last 5 years was -16%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Oriental Pearl GroupLtd shareholders are up 15% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 3% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Oriental Pearl GroupLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Oriental Pearl GroupLtd (1 is potentially serious) that you should be aware of.

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.