Shareholders in CLP Holdings (HKG:2) are in the red if they invested five years ago

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in CLP Holdings Limited (HKG:2), since the last five years saw the share price fall 28%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for CLP Holdings

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 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).

Looking back five years, both CLP Holdings' share price and EPS declined; the latter at a rate of 13% per year. This fall in the EPS is worse than the 6% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that CLP Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think CLP Holdings will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of CLP Holdings, it has a TSR of -10% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that CLP Holdings has rewarded shareholders with a total shareholder return of 9.3% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 2% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Even so, be aware that CLP Holdings is showing 3 warning signs in our investment analysis , you should know about...

But note: CLP Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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