Chevalier International Holdings (HKG:25) sheds HK$151m, company earnings and investor returns have been trending downwards for past five years

We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example the Chevalier International Holdings Limited (HKG:25) share price dropped 66% over five years. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 41%. The falls have accelerated recently, with the share price down 20% in the last three months.

Since Chevalier International Holdings has shed HK$151m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Chevalier International Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Chevalier International Holdings' share price and EPS declined; the latter at a rate of 17% per year. This change in EPS is reasonably close to the 19% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Chevalier International Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Chevalier International Holdings' TSR for the last 5 years was -55%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 9.6% in the twelve months, Chevalier International Holdings shareholders did even worse, losing 38% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Chevalier International Holdings better, we need to consider many other factors. For example, we've discovered 3 warning signs for Chevalier International Holdings (1 is concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.