Yihai International Holding (HKG:1579) sheds HK$601m, company earnings and investor returns have been trending downwards for past three years

As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of Yihai International Holding Ltd. (HKG:1579); the share price is down a whopping 74% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 24% in a year. The falls have accelerated recently, with the share price down 15% in the last three months.

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

View our latest analysis for Yihai International Holding

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Yihai International Holding's earnings per share (EPS) dropped by 0.9% each year. The share price decline of 36% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Yihai International Holding's earnings, revenue and cash flow.

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. As it happens, Yihai International Holding's TSR for the last 3 years was -72%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Yihai International Holding shareholders are down 20% for the year (even including dividends), but the market itself is up 3.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 1 warning sign for Yihai International Holding that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.

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