Strong week for Shenzhen Investment (HKG:604) shareholders doesn't alleviate pain of five-year loss

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Shenzhen Investment Limited (HKG:604) share price dropped 71% in the last half decade. We certainly feel for shareholders who bought near the top. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.

While the last five years has been tough for Shenzhen Investment shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for Shenzhen Investment

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Shenzhen Investment has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

Revenue is actually up 5.6% 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.

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

If you are thinking of buying or selling Shenzhen Investment stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Shenzhen Investment's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Shenzhen Investment shareholders, and that cash payout explains why its total shareholder loss of 57%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

Shenzhen Investment shareholders are down 19% for the year, but the market itself is up 33%. 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 9% 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. Even so, be aware that Shenzhen Investment is showing 2 warning signs in our investment analysis , you should know about...

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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

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.