Investors in China Zheshang Bank (HKG:2016) have unfortunately lost 2.9% over the last five years

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in China Zheshang Bank Co., Ltd (HKG:2016), since the last five years saw the share price fall 28%.

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.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the five years over which the share price declined, China Zheshang Bank's earnings per share (EPS) dropped by 1.9% each year. This reduction in EPS is less than the 6% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 4.79 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on China Zheshang Bank's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for China Zheshang Bank the TSR over the last 5 years was -2.9%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Zheshang Bank shareholders gained a total return of 27% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 0.6% endured over half a decade. It could well be that the business is stabilizing. 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. Take risks, for example - China Zheshang Bank has 1 warning sign we think you should be aware of.

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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 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.