China National Building Material (HKG:3323) stock falls 4.5% in past week as three-year earnings and shareholder returns continue downward trend

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of China National Building Material Company Limited (HKG:3323) have had an unfortunate run in the last three years. Unfortunately, they have held through a 64% decline in the share price in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 43% lower in that time. Furthermore, it's down 13% in about a quarter. That's not much fun for holders.

After losing 4.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for China National Building Material

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...' 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.

During the three years that the share price fell, China National Building Material's earnings per share (EPS) dropped by 35% each year. This fall in the EPS is worse than the 29% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, China National Building Material's TSR for the last 3 years was -56%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in China National Building Material had a tough year, with a total loss of 39% (including dividends), against a market gain of about 4.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand China National Building Material better, we need to consider many other factors. Even so, be aware that China National Building Material is showing 4 warning signs in our investment analysis , and 2 of those are concerning...

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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.