Hang Seng Bank's (HKG:11) earnings have declined over five years, contributing to shareholders 24% loss

Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Hang Seng Bank Limited (HKG:11) shareholders for doubting their decision to hold, with the stock down 40% over a half decade.

On a more encouraging note the company has added HK$7.2b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Hang Seng Bank

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Looking back five years, both Hang Seng Bank's share price and EPS declined; the latter at a rate of 6.6% per year. This reduction in EPS is less than the 10% 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 10.58.

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

We know that Hang Seng Bank has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 Hang Seng Bank the TSR over the last 5 years was -24%, 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

Hang Seng Bank shareholders are up 21% for the year (even including dividends). But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. 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 Hang Seng Bank is showing 1 warning sign in our investment analysis , you should know about...

We will like Hang Seng Bank better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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