Hangzhou Hikvision Digital Technology's (SZSE:002415) earnings trajectory could turn positive as the stock surges 10% this past week

It's nice to see the Hangzhou Hikvision Digital Technology Co., Ltd. (SZSE:002415) share price up 10% in a week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 22% in the last three years, falling well short of the market return.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Hangzhou Hikvision Digital Technology

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Hangzhou Hikvision Digital Technology saw its EPS decline at a compound rate of 5.5% per year, over the last three years. This reduction in EPS is slower than the 8% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Hangzhou Hikvision Digital Technology's key metrics by checking this interactive graph of Hangzhou Hikvision Digital Technology's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hangzhou Hikvision Digital Technology's TSR for the last 3 years was -16%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Hangzhou Hikvision Digital Technology shareholders gained a total return of 1.0% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 5% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hangzhou Hikvision Digital Technology 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.