Churchill China (LON:CHH) sheds UK£13m, company earnings and investor returns have been trending downwards for past five years

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the Churchill China plc (LON:CHH) share price managed to fall 70% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 54%. Furthermore, it's down 32% in about a quarter. That's not much fun for holders.

After losing 17% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Churchill China

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 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.

Looking back five years, both Churchill China's share price and EPS declined; the latter at a rate of 0.4% per year. This reduction in EPS is less than the 21% annual reduction in the share price. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 8.50.

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

We know that Churchill China has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Churchill China the TSR over the last 5 years was -67%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Churchill China had a tough year, with a total loss of 53% (including dividends), against a market gain of about 9.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Churchill China is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.