Investors in China Galaxy Securities (HKG:6881) have unfortunately lost 14% over the last five years

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in China Galaxy Securities Co., Ltd. (HKG:6881), since the last five years saw the share price fall 34%. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. Of course, this share price action may well have been influenced by the 5.2% decline in the broader market, throughout the period.

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.

See our latest analysis for China Galaxy Securities

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

While the share price declined over five years, China Galaxy Securities actually managed to increase EPS by an average of 20% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling China Galaxy Securities stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Galaxy Securities, it has a TSR of -14% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that China Galaxy Securities shareholders have received a total shareholder return of 2.7% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 3% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand China Galaxy Securities better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with China Galaxy Securities (including 1 which is a bit concerning) .

Of course China Galaxy Securities may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.