While shareholders of Greentown Service Group (HKG:2869) are in the red over the last five years, underlying earnings have actually grown

The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Greentown Service Group Co. Ltd. (HKG:2869) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. On the other hand the share price has bounced 8.0% over the last week. The buoyant market could have helped drive the share price pop, since stocks are up 4.2% in the same period.

On a more encouraging note the company has added HK$1.1b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

While the share price declined over five years, Greentown Service Group actually managed to increase EPS by an average of 2.7% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

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.

Revenue is actually up 14% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

Greentown Service Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Greentown Service Group the TSR over the last 5 years was -35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Greentown Service Group provided a TSR of 36% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 6% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Greentown Service Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Greentown Service Group you should be aware of.

Of course Greentown Service Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.