Investors in Agricultural Bank of China (HKG:1288) have seen returns of 20% over the past five years

Ideally, your overall portfolio should beat the market average. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform. While the Agricultural Bank of China Limited (HKG:1288) share price is down 17% over half a decade, the total return to shareholders (which includes dividends) was 20%. And that total return actually beats the market decline of 5.4%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Agricultural Bank of China

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

While the share price declined over five years, Agricultural Bank of China actually managed to increase EPS by an average of 3.6% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Given EPS is up and the share price is down, it's clear the market is more concerned about the business than it was previously. That said, if EPS continues to increase, it seems very likely the share price will get a boost, in the long term.

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

This free interactive report on Agricultural Bank of China's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Agricultural Bank of China's TSR for the last 5 years was 20%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Agricultural Bank of China shareholders have received a total shareholder return of 14% over the last year. That's including the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before forming an opinion on Agricultural Bank of China you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

But note: Agricultural Bank of China may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.