Investing in China Resources Land (HKG:1109) five years ago would have delivered you a 6.2% gain

Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term China Resources Land Limited (HKG:1109) shareholders for doubting their decision to hold, with the stock down 18% over a half decade. Unfortunately the share price momentum is still quite negative, with prices down 11% in thirty days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Looking back five years, both China Resources Land's share price and EPS declined; the latter at a rate of 0.3% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 4% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 7.05 further reflects this reticence.

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

This free interactive report on China Resources Land'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). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Resources Land's TSR for the last 5 years was 6.2%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

China Resources Land shareholders gained a total return of 14% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 1.2% over half a decade This suggests the company might be improving over time. 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 1 warning sign for China Resources Land you should be aware of.

We will like China Resources Land better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.