Investors five-year losses continue as Bank of Zhengzhou (HKG:6196) dips a further 5.1% this week, earnings continue to decline

The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Bank of Zhengzhou Co., Ltd. (HKG:6196), since the last five years saw the share price fall 43%.

With the stock having lost 5.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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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. 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.

During the five years over which the share price declined, Bank of Zhengzhou's earnings per share (EPS) dropped by 4.8% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 11% per year, over the period. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 4.26.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Bank of Zhengzhou's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Bank of Zhengzhou's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Bank of Zhengzhou's TSR, which was a 40% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

Bank of Zhengzhou shareholders are up 16% for the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Bank of Zhengzhou better, we need to consider many other factors. For instance, we've identified 1 warning sign for Bank of Zhengzhou that you should be aware of.

But note: Bank of Zhengzhou 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.