The three-year shareholder returns and company earnings persist lower as Xinyi Energy Holdings (HKG:3868) stock falls a further 4.3% in past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Xinyi Energy Holdings Limited (HKG:3868) have had an unfortunate run in the last three years. Unfortunately, they have held through a 73% decline in the share price in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 54% lower in that time.

After losing 4.3% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Xinyi Energy Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During the three years that the share price fell, Xinyi Energy Holdings' earnings per share (EPS) dropped by 3.6% each year. This reduction in EPS is slower than the 35% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. The less favorable sentiment is reflected in its current P/E ratio of 9.23.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Xinyi Energy 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Xinyi Energy Holdings, it has a TSR of -69% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in Xinyi Energy Holdings had a tough year, with a total loss of 52% (including dividends), against a market gain of about 1.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Xinyi Energy Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.

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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.

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