The three-year decline in earnings might be taking its toll on Hutchison Port Holdings Trust (SGX:NS8U) shareholders as stock falls 3.3% over the past week

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Hutchison Port Holdings Trust (SGX:NS8U) share price is up 75% in the last three years, clearly besting the market return of around 12% (not including dividends).

Since the long term performance has been good but there's been a recent pullback of 3.3%, let's check if the fundamentals match the share price.

Check out our latest analysis for Hutchison Port Holdings Trust

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last three years, Hutchison Port Holdings Trust failed to grow earnings per share, which fell 2.0% (annualized).

Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. So other metrics may hold the key to understanding what is influencing investors.

We note that the dividend is higher than it was preciously, so that may have assisted the share price. It could be that the company is reaching maturity and dividend investors are buying for the yield. On top of that, revenue grew at a rate of 4.3% per year, and it's likely investors interpret that as pointing to a brighter future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Hutchison Port Holdings Trust stock, you should check out this FREE detailed report on its balance sheet.

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 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. We note that for Hutchison Port Holdings Trust the TSR over the last 3 years was 123%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Hutchison Port Holdings Trust shareholders are down 14% for the year (even including dividends), but the market itself is up 2.1%. 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. On the bright side, long term shareholders have made money, with a gain of 0.9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hutchison Port Holdings Trust better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Hutchison Port Holdings Trust (including 1 which can't be ignored) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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