Henderson Land Development's (HKG:12 five-year decrease in earnings delivers investors with a 14% loss

Henderson Land Development Company Limited (HKG:12) shareholders should be happy to see the share price up 15% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 37% in that time, significantly under-performing the market.

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

Check out our latest analysis for Henderson Land Development

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 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).

Looking back five years, both Henderson Land Development's share price and EPS declined; the latter at a rate of 23% per year. This fall in the EPS is worse than the 9% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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, Henderson Land Development's TSR for the last 5 years was -14%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Henderson Land Development has rewarded shareholders with a total shareholder return of 32% in the last twelve months. And that does include the dividend. Notably the five-year annualised TSR loss of 3% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Henderson Land Development has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.