Despite delivering investors losses of 15% over the past 3 years, AIA Group (HKG:1299) has been growing its earnings

While it may not be enough for some shareholders, we think it is good to see the AIA Group Limited (HKG:1299) share price up 11% in a single quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 20% in the last three years, falling well short of the market return.

While the stock has risen 7.4% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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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.

Although the share price is down over three years, AIA Group actually managed to grow EPS by 1.5% per year in that time. 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). Or else the company was over-hyped in the past, and so its growth has disappointed.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. Looking to other metrics might better explain the share price change.

We think that the revenue decline over three years, at a rate of 24% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

AIA Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for AIA Group in this interactive graph of future profit estimates.

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. As it happens, AIA Group's TSR for the last 3 years was -15%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 21% in the last year, AIA Group shareholders lost 1.0% (even including dividends). 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. However, the loss over the last year isn't as bad as the 1.2% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Before spending more time on AIA Group it might be wise to click here to see if insiders have been buying or selling shares.

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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.