China Gas Holdings (HKG:384) stock falls 4.0% in past week as three-year earnings and shareholder returns continue downward trend

Every investor on earth makes bad calls sometimes. But really big losses can really drag down an overall portfolio. So spare a thought for the long term shareholders of China Gas Holdings Limited (HKG:384); the share price is down a whopping 77% in the last three years. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 45% lower in that time. Even worse, it's down 10% in about a month, which isn't fun at all.

If the past week is anything to go by, investor sentiment for China Gas Holdings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for China Gas Holdings

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 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).

China Gas Holdings saw its EPS decline at a compound rate of 34% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 39% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on China Gas Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, China Gas Holdings' TSR for the last 3 years was -73%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that China Gas Holdings shareholders are down 41% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for China Gas Holdings (of which 1 makes us a bit uncomfortable!) you should know about.

China Gas Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.