The five-year shareholder returns and company earnings persist lower as Sinosoft Technology Group (HKG:1297) stock falls a further 12% in past week

While not a mind-blowing move, it is good to see that the Sinosoft Technology Group Limited (HKG:1297) share price has gained 13% in the last three months. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Five years have seen the share price descend precipitously, down a full 83%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Since Sinosoft Technology Group has shed HK$67m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Sinosoft Technology Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Sinosoft Technology Group's earnings per share (EPS) dropped by 25% each year. This change in EPS is reasonably close to the 30% average annual decrease in the share price. This suggests that market participants have not changed their view of the company all that much. So it's fair to say the share price has been responding to changes in EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Sinosoft Technology Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We've already covered Sinosoft Technology Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Sinosoft Technology Group's TSR, which was a 80% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 1.6% in the twelve months, Sinosoft Technology Group shareholders did even worse, losing 35%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 5 warning signs we've spotted with Sinosoft Technology Group (including 1 which is a bit unpleasant) .

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.