Bank of East Asia (HKG:23) investors are sitting on a loss of 54% if they invested five years ago

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the The Bank of East Asia, Limited (HKG:23) share price dropped 64% in the last half decade. That is extremely sub-optimal, to say the least.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for Bank of East Asia

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 Bank of East Asia's share price and EPS declined; the latter at a rate of 8.4% per year. This reduction in EPS is less than the 18% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 6.85 further reflects this reticence.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bank of East Asia's TSR for the last 5 years was -54%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, Bank of East Asia shareholders can take comfort that , including dividends,their trailing twelve month loss of 6.9% wasn't as bad as the market loss of around 11%. Of far more concern is the 9% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Take risks, for example - Bank of East Asia has 1 warning sign we think you should be aware of.

Of course Bank of East Asia may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.