Vanke Overseas Investment Holding (HKG:1036) adds HK$70m to market cap in the past 7 days, though investors from five years ago are still down 61%

This week we saw the Vanke Overseas Investment Holding Company Limited (HKG:1036) share price climb by 16%. But don't envy holders -- looking back over 5 years the returns have been really bad. In that time the share price has delivered a rude shock to holders, who find themselves down 68% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

While the last five years has been tough for Vanke Overseas Investment Holding shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Vanke Overseas Investment Holding

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Vanke Overseas Investment Holding has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. On top of that, revenue has declined by 11% per year over the half decade; that could be a red flag for some investors.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Vanke Overseas Investment Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Vanke Overseas Investment Holding, it has a TSR of -61% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Vanke Overseas Investment Holding shareholders are down 10% for the year (even including dividends), but the market itself is up 2.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Vanke Overseas Investment Holding you should be aware of, and 2 of them make us uncomfortable.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.