Allied Group (HKG:373) shareholders are up 9.4% this past week, but still in the red over the last three years

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Allied Group Limited (HKG:373) shareholders have had that experience, with the share price dropping 44% in three years, versus a market decline of about 5.0%.

While the stock has risen 9.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Allied Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

We know that Allied Group has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

Revenue is actually up 17% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Allied Group further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Allied Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We've already covered Allied Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Allied Group shareholders, and that cash payout explains why its total shareholder loss of 37%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Allied Group shareholders are up 7.2% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 1.1% over half a decade This suggests the company might be improving over time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Allied Group , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.