Investors five-year losses continue as Swire Properties (HKG:1972) dips a further 5.6% this week, earnings continue to decline

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Swire Properties Limited (HKG:1972), since the last five years saw the share price fall 61%. And we doubt long term believers are the only worried holders, since the stock price has declined 34% over the last twelve months. The falls have accelerated recently, with the share price down 23% in the last three months.

After losing 5.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Swire Properties

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 Swire Properties' share price and EPS declined; the latter at a rate of 38% per year. The share price decline of 17% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Swire Properties' key metrics by checking this interactive graph of Swire Properties's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Swire Properties the TSR over the last 5 years was -50%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Swire Properties had a tough year, with a total loss of 29% (including dividends), against a market gain of about 7.3%. 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, 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 Swire Properties better, we need to consider many other factors. For example, we've discovered 3 warning signs for Swire Properties (1 is a bit concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com