Fortune Real Estate Investment Trust (HKG:778) sheds HK$872m, company earnings and investor returns have been trending downwards for past five years

Ideally, your overall portfolio should beat the market average. But even in a market-beating portfolio, some stocks will lag the market. While the Fortune Real Estate Investment Trust (HKG:778) share price is down 38% over half a decade, the total return to shareholders (which includes dividends) was -17%. And that total return actually beats the market decline of 17%. And we doubt long term believers are the only worried holders, since the stock price has declined 26% over the last twelve months. The falls have accelerated recently, with the share price down 11% in the last three months. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.

After losing 7.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Fortune Real Estate Investment Trust

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Fortune Real Estate Investment Trust became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of around 2.0% would not have helped the stock price. So the the weak dividend and revenue data could well help explain the soft share price.

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

We know that Fortune Real Estate Investment Trust has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Fortune Real Estate Investment Trust in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Fortune Real Estate Investment Trust, it has a TSR of -17% 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

While it's never nice to take a loss, Fortune Real Estate Investment Trust shareholders can take comfort that , including dividends,their trailing twelve month loss of 21% wasn't as bad as the market loss of around 26%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 3% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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 1 warning sign for Fortune Real Estate Investment Trust that you should be aware of.

Of course Fortune Real Estate Investment Trust may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.