The three-year shareholder returns and company earnings persist lower as Longfor Group Holdings (HKG:960) stock falls a further 8.4% in past week

While it may not be enough for some shareholders, we think it is good to see the Longfor Group Holdings Limited (HKG:960) share price up 27% in a single quarter. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 72% in that period. So it's good to see it climbing back up. The rise has some hopeful, but turnarounds are often precarious.

Since Longfor Group Holdings has shed HK$7.2b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Longfor Group Holdings

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 three years that the share price fell, Longfor Group Holdings' earnings per share (EPS) dropped by 24% each year. The share price decline of 34% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 6.85.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Longfor Group Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Longfor Group Holdings the TSR over the last 3 years was -66%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 16% in the last year, Longfor Group Holdings shareholders lost 12% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. For instance, we've identified 5 warning signs for Longfor Group Holdings (1 is a bit unpleasant) that you should be aware of.

Longfor Group Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.