Lee & Man Chemical's (HKG:746) one-year decline in earnings translates into losses for shareholders

Lee & Man Chemical Company Limited (HKG:746) shareholders should be happy to see the share price up 15% in the last month. But that is minimal compensation for the share price under-performance over the last year. The cold reality is that the stock has dropped 46% in one year, under-performing the market.

Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for Lee & Man Chemical

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unhappily, Lee & Man Chemical had to report a 77% decline in EPS over the last year. The share price fall of 46% 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 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Lee & Man Chemical's TSR for the last 1 year was -43%, 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 Lee & Man Chemical shareholders are down 43% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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 Lee & Man Chemical better, we need to consider many other factors. Even so, be aware that Lee & Man Chemical is showing 3 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.