Wharf Real Estate Investment (HKG:1997) earnings and shareholder returns have been trending downwards for the last five years, but the stock increases 3.1% this past week

While it may not be enough for some shareholders, we think it is good to see the Wharf Real Estate Investment Company Limited (HKG:1997) share price up 11% in a single quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 44%, which falls well short of the return you could get by buying an index fund.

The recent uptick of 3.1% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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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 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.

During the five years over which the share price declined, Wharf Real Estate Investment's earnings per share (EPS) dropped by 26% each year. The share price decline of 11% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 72.58, it's fair to say the market sees a brighter future for the business.

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

This free interactive report on Wharf Real Estate Investment's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Wharf Real Estate Investment's TSR for the last 5 years was -31%, 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

Wharf Real Estate Investment provided a TSR of 8.0% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 5% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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. Take risks, for example - Wharf Real Estate Investment has 3 warning signs we think you should be aware of.

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.