The five-year underlying earnings growth at Eastern CommunicationsLtd (SHSE:600776) is promising, but the shareholders are still in the red over that time

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Eastern Communications Co.,Ltd. (SHSE:600776) shareholders for doubting their decision to hold, with the stock down 45% over a half decade. More recently, the share price has dropped a further 14% in a month.

After losing 5.7% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Eastern CommunicationsLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

While the share price declined over five years, Eastern CommunicationsLtd actually managed to increase EPS by an average of 6.2% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The modest 0.5% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 2.4% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Eastern CommunicationsLtd shareholders gained a total return of 4.5% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 8% per year, over five years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Eastern CommunicationsLtd is showing 1 warning sign in our investment analysis , 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.