China Hongqiao Group's (HKG:1378) one-year decline in earnings translates into losses for shareholders

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the China Hongqiao Group Limited (HKG:1378) share price is down 35% in the last year. That's disappointing when you consider the market declined 19%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 16% in three years. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.

While the stock has risen 4.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for China Hongqiao Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Unhappily, China Hongqiao Group had to report a 80% decline in EPS over the last year. The share price fall of 35% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of China Hongqiao Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Hongqiao Group's TSR for the last 1 year was -31%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that China Hongqiao Group shareholders are down 31% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 19%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand China Hongqiao Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China Hongqiao Group you should know about.

We will like China Hongqiao Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.