Investors five-year losses continue as Hanhua Financial Holding (HKG:3903) dips a further 12% this week, earnings continue to decline

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example the Hanhua Financial Holding Co., Ltd. (HKG:3903) share price dropped 62% over five years. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 38% in the last year. The falls have accelerated recently, with the share price down 35% in the last three months.

If the past week is anything to go by, investor sentiment for Hanhua Financial Holding isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Hanhua Financial Holding

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Looking back five years, both Hanhua Financial Holding's share price and EPS declined; the latter at a rate of 36% per year. This fall in the EPS is worse than the 18% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Hanhua Financial Holding's earnings, revenue and cash flow 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 Hanhua Financial Holding's share price action, but we should also mention its 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. Dividends have been really beneficial for Hanhua Financial Holding shareholders, and that cash payout explains why its total shareholder loss of 60%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

We regret to report that Hanhua Financial Holding shareholders are down 38% for the year. Unfortunately, that's worse than the broader market decline of 4.2%. 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 10% 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. 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. Take risks, for example - Hanhua Financial Holding has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.