The past five years for Hang Lung Properties (HKG:101) investors has not been profitable

The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Hang Lung Properties Limited (HKG:101) shareholders for doubting their decision to hold, with the stock down 62% over a half decade. In contrast, the stock price has popped 9.2% in the last thirty days. But this could be related to good market conditions, with stocks up around 10% during the period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Hang Lung Properties

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Hang Lung Properties' earnings per share (EPS) dropped by 20% each year. Notably, the share price has fallen at 18% per year, fairly close to the change in the EPS. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Hang Lung Properties' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Hang Lung Properties, it has a TSR of -49% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Hang Lung Properties shareholders are down 17% for the year (even including dividends), but the market itself is up 33%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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 Hang Lung Properties better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hang Lung Properties , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.