0.9% earnings growth over 5 years has not materialized into gains for Greentown Service Group (HKG:2869) shareholders over that period

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 Greentown Service Group Co. Ltd. (HKG:2869) share price dropped 57% over five years. That is extremely sub-optimal, to say the least. More recently, the share price has dropped a further 8.4% in a month. We do note, however, that the broader market is down 5.3% in that period, and this may have weighed on the share price.

Since Greentown Service Group has shed HK$411m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Greentown Service Group

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.

During the unfortunate half decade during which the share price slipped, Greentown Service Group actually saw its earnings per share (EPS) improve by 4.5% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Looking to other metrics might better explain the share price change.

In contrast to the share price, revenue has actually increased by 18% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Greentown Service Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Greentown Service Group stock, you should check out this free report showing analyst consensus estimates for future profits.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Greentown Service Group's TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Greentown Service Group shareholders have received a total shareholder return of 20% over one year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. 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. To that end, you should be aware of the 1 warning sign we've spotted with Greentown Service Group .

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.