How Much Did Kunming Dianchi Water Treatment's (HKG:3768) Shareholders Earn On Their Investment Over The Last Three Years?

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Kunming Dianchi Water Treatment Co., Ltd. (HKG:3768) shareholders have had that experience, with the share price dropping 23% in three years, versus a market decline of about 4.7%. The good news is that the stock is up 2.0% in the last week.

View our latest analysis for Kunming Dianchi Water Treatment

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. 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.

During the unfortunate three years of share price decline, Kunming Dianchi Water Treatment actually saw its earnings per share (EPS) improve by 1.6% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. Looking to other metrics might better explain the share price change.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Kunming Dianchi Water Treatment has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Kunming Dianchi Water Treatment's earnings, revenue and cash flow 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Kunming Dianchi Water Treatment's TSR for the last 3 years was -0.8%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Kunming Dianchi Water Treatment produced a TSR of 18% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 56%. On the bright side, that's certainly better than the yearly loss of about 0.2% endured over the last three years, implying that the company is doing better recently. We hope the turnaround in fortunes continues. 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. Case in point: We've spotted 4 warning signs for Kunming Dianchi Water Treatment you should be aware of, and 2 of them are significant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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