CK Hutchison Holdings (HKG:1) shareholders have earned a 12% CAGR over the last three years

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. For example, the CK Hutchison Holdings Limited (HKG:1) share price return of 18% over three years lags the market return in the same period. In the last year the stock has gained 15%.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last three years, CK Hutchison Holdings failed to grow earnings per share, which fell 39% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the dividend payments explain the share price rise, since we don't see any improvement in that regard. Given the modest revenue growth, we doubt it explains the share price rise. But a closer look at the numbers might enlighten.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

If you are thinking of buying or selling CK Hutchison Holdings stock, you should check out this FREE detailed report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for CK Hutchison Holdings the TSR over the last 3 years was 40%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CK Hutchison Holdings shareholders gained a total return of 20% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. This suggests the company might be improving over time. 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. To that end, you should be aware of the 3 warning signs we've spotted with CK Hutchison Holdings .

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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.