Flat Glass Group's (HKG:6865) earnings have declined over three years, contributing to shareholders 68% loss

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Flat Glass Group Co., Ltd. (HKG:6865) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 70% drop in the share price over that period. And the ride hasn't got any smoother in recent times over the last year, with the price 47% lower in that time. Furthermore, it's down 26% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

On a more encouraging note the company has added HK$629m 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Flat Glass Group saw its EPS decline at a compound rate of 42% per year, over the last three years. In comparison the 33% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 55.78, it's fair to say the market sees a brighter future for the business.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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. It might be well worthwhile taking a look at our free report on Flat Glass Group's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Flat Glass Group's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Flat Glass Group's TSR, which was a 68% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

Investors in Flat Glass Group had a tough year, with a total loss of 45%, against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. 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 Flat Glass Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Flat Glass Group you should be aware of, and 1 of them is concerning.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.