The three-year underlying earnings growth at Shanghai Haohai Biological Technology (HKG:6826) is promising, but the shareholders are still in the red over that time

One of the frustrations of investing is when a stock goes down. But when the market is down, you're bound to have some losers. The Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) is down 23% over three years, but the total shareholder return is -20% once you include the dividend. That's better than the market which declined 22% over the last three years. Shareholders have had an even rougher run lately, with the share price down 23% in the last 90 days.

With the stock having lost 8.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Shanghai Haohai Biological Technology

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).

During the unfortunate three years of share price decline, Shanghai Haohai Biological Technology actually saw its earnings per share (EPS) improve by 16% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 1.2% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 20% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Shanghai Haohai Biological Technology more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on Shanghai Haohai Biological Technology

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Shanghai Haohai Biological Technology's TSR for the last 3 years was -20%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Shanghai Haohai Biological Technology shareholders have received a total shareholder return of 23% over one year. And that does include the dividend. That's better than the annualised return of 1.1% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Shanghai Haohai Biological Technology scores on these 3 valuation metrics.

But note: Shanghai Haohai Biological Technology 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.