China Taiping Insurance Holdings' (HKG:966) earnings trajectory could turn positive as the stock rallies 5.5% this past week

China Taiping Insurance Holdings Company Limited (HKG:966) shareholders should be happy to see the share price up 17% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 69% during that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.

While the last five years has been tough for China Taiping Insurance Holdings 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 China Taiping Insurance Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Looking back five years, both China Taiping Insurance Holdings' share price and EPS declined; the latter at a rate of 17% per year. Notably, the share price has fallen at 21% per year, fairly close to the change in the EPS. This suggests that market participants have not changed their view of the company all that much. So it's fair to say the share price has been responding to changes in EPS.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. As it happens, China Taiping Insurance Holdings' TSR for the last 5 years was -65%, 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

While the broader market lost about 8.2% in the twelve months, China Taiping Insurance Holdings shareholders did even worse, losing 13% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% 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 Taiping Insurance Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for China Taiping Insurance Holdings that you should be aware of before investing here.

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.