Lee & Man Paper Manufacturing (HKG:2314) sheds HK$472m, company earnings and investor returns have been trending downwards for past five years

Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. To wit, the Lee & Man Paper Manufacturing Limited (HKG:2314) share price managed to fall 63% over five long years. That is extremely sub-optimal, to say the least.

With the stock having lost 4.6% 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 Lee & Man Paper Manufacturing

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Looking back five years, both Lee & Man Paper Manufacturing's share price and EPS declined; the latter at a rate of 16% per year. Notably, the share price has fallen at 18% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. 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 like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Lee & Man Paper Manufacturing's earnings, revenue and cash flow.

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 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. In the case of Lee & Man Paper Manufacturing, it has a TSR of -53% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Lee & Man Paper Manufacturing provided a TSR of 19% over the last twelve months. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 9% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Lee & Man Paper Manufacturing better, we need to consider many other factors. For example, we've discovered 2 warning signs for Lee & Man Paper Manufacturing (1 is a bit unpleasant!) that you should be aware of before investing here.

Lee & Man Paper Manufacturing is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.