Hangzhou Hikvision Digital Technology (SZSE:002415) shareholders have endured a 42% loss from investing in the stock three years ago

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term Hangzhou Hikvision Digital Technology Co., Ltd. (SZSE:002415) shareholders, since the share price is down 46% in the last three years, falling well short of the market decline of around 23%.

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 Hangzhou Hikvision Digital Technology

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 unfortunate three years of share price decline, Hangzhou Hikvision Digital Technology actually saw its earnings per share (EPS) improve by 0.2% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.

We note that, in three years, revenue has actually grown at a 6.7% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Hangzhou Hikvision Digital Technology further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Hangzhou Hikvision Digital Technology is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Hangzhou Hikvision Digital Technology in this interactive graph of future profit estimates.

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 Hangzhou Hikvision Digital Technology the TSR over the last 3 years was -42%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, Hangzhou Hikvision Digital Technology shareholders can take comfort that , including dividends,their trailing twelve month loss of 1.5% wasn't as bad as the market loss of around 12%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 8% 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hangzhou Hikvision Digital Technology , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.