6.0% earnings growth over 1 year has not materialized into gains for Zengame Technology Holding (HKG:2660) shareholders over that period

It's understandable if you feel frustrated when a stock you own sees a lower share price. But often it is not a reflection of the fundamental business performance. The Zengame Technology Holding Limited (HKG:2660) is down 14% over a year, but the total shareholder return is -9.8% once you include the dividend. That's better than the market which declined 26% over the last year. We wouldn't rush to judgement on Zengame Technology Holding because we don't have a long term history to look at. Unfortunately the last month hasn't been any better, with the share price down 21%. However, we note the price may have been impacted by the broader market, which is down 18% in the same time period.

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

Check out our latest analysis for Zengame Technology Holding

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Even though the Zengame Technology Holding share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

We don't see any weakness in the Zengame Technology Holding's dividend so the steady payout can't really explain the share price drop. We'd be more worried about the fact that revenue fell 13% year on year. The market may be extrapolating the decline, leading to questions around the sustainability of the EPS.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling Zengame Technology Holding stock, you should check out this FREE detailed report on its balance sheet.

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. We note that for Zengame Technology Holding the TSR over the last 1 year was -9.8%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's not great that Zengame Technology Holding shares failed to make money for shareholders in the last year, but the silver lining is that the loss of 9.8%, including dividends, wasn't as bad as the broader market loss of about 26%. However, the problem arose in the last three months, which saw the share price drop 13%. The recent drop implies that investors are increasingly averse to the stock -- quite possibly due to a deterioration of the business. However, this could create an opportunity if the fundamentals remain strong. It's always interesting to track share price performance over the longer term. But to understand Zengame Technology Holding better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Zengame Technology Holding you should know about.

Of course Zengame Technology Holding may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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.