The past five years for Gemdale (SHSE:600383) investors has not been profitable

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Gemdale Corporation (SHSE:600383) share price dropped 65% in the last half decade. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 19% in the last three months.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

See our latest analysis for Gemdale

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

In the last half decade Gemdale saw its share price fall as its EPS declined below zero. This was, in part, due to extraordinary items impacting earnings. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.

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

Dive deeper into Gemdale's key metrics by checking this interactive graph of Gemdale'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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Gemdale's TSR for the last 5 years was -58%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Gemdale shareholders gained a total return of 2.6% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 10% endured over half a decade. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Gemdale that you should be aware of.

Of course Gemdale may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.