China Merchants Land (HKG:978) Shareholders Received A Total Return Of Negative 8.0% In The Last Five Years

Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term China Merchants Land Limited (HKG:978) shareholders for doubting their decision to hold, with the stock down 30% over a half decade. Unhappily, the share price slid 2.5% in the last week.

Check out our latest analysis for China Merchants Land

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. 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.

While the share price declined over five years, China Merchants Land actually managed to increase EPS by an average of 25% 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.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on China Merchants Land's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, China Merchants Land's TSR for the last 5 years was -8.0%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

China Merchants Land provided a TSR of 13% over the year (including dividends). That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 1.6% over the last five years. While 'turnarounds seldom turn' there are green shoots for China Merchants Land. It's always interesting to track share price performance over the longer term. But to understand China Merchants Land better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with China Merchants Land (including 1 which is makes us a bit uncomfortable) .

We will like China Merchants Land better if we see some big insider buys. While we wait, check out this free list of growing companies 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 HK exchanges.

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This article by Simply Wall St is general in nature. 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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