NagaCorp (HKG:3918) earnings and shareholder returns have been trending downwards for the last five years, but the stock rises 3.1% this past week

NagaCorp Ltd. (HKG:3918) shareholders will doubtless be very grateful to see the share price up 62% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 52% in that time, significantly under-performing the market.

While the stock has risen 3.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for NagaCorp

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Looking back five years, both NagaCorp's share price and EPS declined; the latter at a rate of 15% per year. This change in EPS is reasonably close to the 14% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price change has reflected changes in earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on NagaCorp's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between NagaCorp's total shareholder return (TSR) and its share price change, which we've covered above. 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. NagaCorp's TSR of was a loss of 48% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that NagaCorp shareholders are down 32% for the year. Unfortunately, that's worse than the broader market decline of 3.4%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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 is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

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.