Investors five-year losses continue as Wang On Group (HKG:1222) dips a further 11% this week, earnings continue to decline

We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example the Wang On Group Limited (HKG:1222) share price dropped 66% over five years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 33%. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.

With the stock having lost 11% 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 Wang On Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Wang On Group moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

We don't think that the 1.2% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 11% per year is viewed as evidence that Wang On Group is shrinking. That could explain the weak share price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Wang On Group's TSR for the last 5 years was -57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Wang On Group shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Wang On Group (of which 2 are a bit concerning!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.