Lam Soon (Hong Kong)'s (HKG:411) earnings trajectory could turn positive as the stock spikes 11% this past week

It's nice to see the Lam Soon (Hong Kong) Limited (HKG:411) share price up 11% in a week. But if you look at the last five years the returns have not been good. After all, the share price is down 42% in that time, significantly under-performing the market.

While the last five years has been tough for Lam Soon (Hong Kong) shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Lam Soon (Hong Kong)

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the five years over which the share price declined, Lam Soon (Hong Kong)'s earnings per share (EPS) dropped by 23% each year. This fall in the EPS is worse than the 10% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Lam Soon (Hong Kong)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Lam Soon (Hong Kong)'s TSR for the last 5 years was -31%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Lam Soon (Hong Kong) shareholders are down 16% over twelve months (even including dividends), which isn't far from the market return of -17%. So last year was actually even worse than the last five years, which cost shareholders 6% per year. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Lam Soon (Hong Kong) (including 1 which shouldn't be ignored) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.