The three-year shareholder returns and company earnings persist lower as China National Building Material (HKG:3323) stock falls a further 4.8% in past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of China National Building Material Company Limited (HKG:3323) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 64% drop in the share price over that period. More recently, the share price has dropped a further 11% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

If the past week is anything to go by, investor sentiment for China National Building Material isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 38% each year. In comparison the 29% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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

We know that China National Building Material has improved its bottom line lately, but is it going to grow revenue? Check if analysts think China National Building Material will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China National Building Material the TSR over the last 3 years was -51%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

China National Building Material shareholders gained a total return of 4.0% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 7% 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 China National Building Material better, we need to consider many other factors. For example, we've discovered 2 warning signs for China National Building Material (1 is a bit unpleasant!) that you should be aware of before investing here.

But note: China National Building Material may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.