The five-year loss for China Conch Venture Holdings (HKG:586) shareholders likely driven by its shrinking earnings

China Conch Venture Holdings Limited (HKG:586) shareholders should be happy to see the share price up 23% in the last quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 71% during that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.

On a more encouraging note the company has added HK$681m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During the five years over which the share price declined, China Conch Venture Holdings' earnings per share (EPS) dropped by 22% each year. This change in EPS is remarkably close to the 22% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. Rather, the share price has approximately tracked EPS growth.

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

This free interactive report on China Conch Venture 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). 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. As it happens, China Conch Venture Holdings' TSR for the last 5 years was -53%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that China Conch Venture Holdings has rewarded shareholders with a total shareholder return of 71% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand China Conch Venture Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with China Conch Venture Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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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.