The three-year decline in earnings for Greentown China Holdings HKG:3900) isn't encouraging, but shareholders are still up 138% over that period

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Greentown China Holdings Limited (HKG:3900) share price is 108% higher than it was three years ago. How nice for those who held the stock! Then again, the 9.6% share price decline hasn't been so fun for shareholders. This could be related to the soft market, with stocks down around 4.7% in the last month.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Greentown China 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).

Over the last three years, Greentown China Holdings failed to grow earnings per share, which fell 3.5% (annualized).

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It could be that the revenue growth of 8.4% per year is viewed as evidence that Greentown China Holdings is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Greentown China Holdings the TSR over the last 3 years was 138%, 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

Investors in Greentown China Holdings had a tough year, with a total loss of 22% (including dividends), against a market gain of about 9.4%. 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. On the bright side, long term shareholders have made money, with a gain of 16% 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. It's always interesting to track share price performance over the longer term. But to understand Greentown China Holdings better, we need to consider many other factors. For instance, we've identified 3 warning signs for Greentown China Holdings (1 makes us a bit uncomfortable) that you should be aware of.

Greentown China Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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.

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