Positive earnings growth hasn't been enough to get Poly Property Services (HKG:6049) shareholders a favorable return over the last five years

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the Poly Property Services Co., Ltd. (HKG:6049) share price managed to fall 57% over five long years. That is extremely sub-optimal, to say the least. In contrast, the stock price has popped 8.5% in the last thirty days. However, this may be a matter of broader market optimism, since stocks are up 4.3% in the same time.

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

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate half decade during which the share price slipped, Poly Property Services actually saw its earnings per share (EPS) improve by 17% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

The steady dividend doesn't really explain why the share price is down. It's not immediately clear to us why the stock price is down but further research might provide some answers.

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

Poly Property Services is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Poly Property Services in this interactive graph of future profit 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 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 Poly Property Services, it has a TSR of -51% 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

Poly Property Services shareholders gained a total return of 20% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. 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 - Poly Property Services has 1 warning sign we think you should be aware of.

We will like Poly Property Services better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.

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.