The five-year shareholder returns and company earnings persist lower as Hengan International Group (HKG:1044) stock falls a further 7.3% in past week

Hengan International Group Company Limited (HKG:1044) shareholders should be happy to see the share price up 16% in the last month. But if you look at the last five years the returns have not been good. After all, the share price is down 51% in that time, significantly under-performing the market.

With the stock having lost 7.3% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Hengan International Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Hengan International Group's earnings per share (EPS) dropped by 3.8% each year. This reduction in EPS is less than the 13% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.03 further reflects this reticence.

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

We know that Hengan International Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Hengan International Group will grow revenue in the future.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Hengan International Group the TSR over the last 5 years was -37%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Hengan International Group shareholders are up 12% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 7% endured over half a decade. It could well be that the business is stabilizing. 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. Take risks, for example - Hengan International Group has 1 warning sign we think you should be aware of.

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.