Earnings growth of 1.2% over 5 years hasn't been enough to translate into positive returns for China Oilfield Services (HKG:2883) shareholders

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term China Oilfield Services Limited (HKG:2883) shareholders for doubting their decision to hold, with the stock down 36% over a half decade. Even worse, it's down 9.3% in about a month, which isn't fun at all.

After losing 4.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for China Oilfield Services

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 Oilfield Services actually managed to increase EPS by an average of 5.9% per year. 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.

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.

In contrast to the share price, revenue has actually increased by 11% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think China Oilfield Services will earn in the future (free profit forecasts).

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 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. We note that for China Oilfield Services the TSR over the last 5 years was -28%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

China Oilfield Services shareholders are down 5.9% for the year (even including dividends), but the market itself is up 31%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 5% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand China Oilfield Services better, we need to consider many other factors. Even so, be aware that China Oilfield Services is showing 1 warning sign in our investment analysis , you should know about...

We will like China Oilfield Services better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.