Investors five-year losses continue as CSI Properties (HKG:497) dips a further 10% this week, earnings continue to decline

Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held CSI Properties Limited (HKG:497) for five whole years - as the share price tanked 76%. And we doubt long term believers are the only worried holders, since the stock price has declined 44% over the last twelve months. The falls have accelerated recently, with the share price down 19% in the last three months. Of course, this share price action may well have been influenced by the 7.5% decline in the broader market, throughout the period.

If the past week is anything to go by, investor sentiment for CSI Properties isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for CSI Properties

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. 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, CSI Properties moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower. The revenue decline of about 50% per year might also encourage sellers.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on CSI Properties' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of CSI Properties, it has a TSR of -73% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 21% in the twelve months, CSI Properties shareholders did even worse, losing 42% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with CSI Properties (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.