Shareholders 27% loss in BOE Technology Group (SZSE:000725) partly attributable to the company's decline in earnings over past three years

Investors can earn very close to the average market return by buying an index fund. By comparison, an individual stock is unlikely to match market returns - and could well fall short. Unfortunately, that's been the case for longer term BOE Technology Group Company Limited (SZSE:000725) shareholders, since the share price is down 33% in the last three years, less than the market decline of around 26%. Shareholders have had an even rougher run lately, with the share price down 10% in the last 90 days. But this could be related to the weak market, which is down 8.6% in the same period.

The recent uptick of 3.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for BOE Technology Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years that the share price fell, BOE Technology Group's earnings per share (EPS) dropped by 33% each year. In comparison the 12% 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. With a P/E ratio of 46.14, it's fair to say the market sees a brighter future for the business.

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

We know that BOE Technology Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, BOE Technology Group's TSR for the last 3 years was -27%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that BOE Technology Group shares lost 6.0% throughout the year, that wasn't as bad as the market loss of 18%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 2% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for BOE Technology Group you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

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