China SCE Group Holdings' (HKG:1966) earnings have declined over three years, contributing to shareholders 25% loss

This week we saw the China SCE Group Holdings Limited (HKG:1966) share price climb by 11%. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 41% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added CN¥760m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for China SCE Group Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

China SCE Group Holdings saw its EPS decline at a compound rate of 2.1% per year, over the last three years. This reduction in EPS is slower than the 16% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 1.59.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on China SCE Group Holdings' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China SCE Group Holdings' TSR for the last 3 years was -25%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 11% in the twelve months, China SCE Group Holdings shareholders did even worse, losing 34% (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. On the bright side, long term shareholders have made money, with a gain of 1.5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - China SCE Group Holdings has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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 HK 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.