Far East Horizon (HKG:3360) shareholders have endured a 14% loss from investing in the stock three years ago

One of the frustrations of investing is when a stock goes down. But it can difficult to make money in a declining market. While the Far East Horizon Limited (HKG:3360) share price is down 28% in the last three years, the total return to shareholders (which includes dividends) was -14%. That's better than the market which declined 17% over the last three years.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Far East Horizon

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Although the share price is down over three years, Far East Horizon actually managed to grow EPS by 10% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Far East Horizon has actually grown its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.

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 Far East Horizon 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Far East Horizon the TSR over the last 3 years was -14%, 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

Far East Horizon shareholders gained a total return of 10% during 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 0.2% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Far East Horizon is showing 1 warning sign in our investment analysis , you should know about...

But note: Far East Horizon 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.