China Petrochemical Development's (TWSE:1314 three-year decrease in earnings delivers investors with a 21% loss

For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term China Petrochemical Development Corporation (TWSE:1314) shareholders, since the share price is down 25% in the last three years, falling well short of the market return of around 36%. More recently, the share price has dropped a further 8.3% in a month. We do note, however, that the broader market is down 12% in that period, and this may have weighed on the share price.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for China Petrochemical Development

We don't think that China Petrochemical Development's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

Over the last three years, China Petrochemical Development's revenue dropped 3.1% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 8%, annualized. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

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

We know that China Petrochemical Development has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling China Petrochemical Development stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between China Petrochemical Development's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for China Petrochemical Development shareholders, and that cash payout explains why its total shareholder loss of 21%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

China Petrochemical Development shareholders are up 5.3% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This suggests the company might be improving over time. 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. For instance, we've identified 3 warning signs for China Petrochemical Development (2 are a bit concerning) that you should be aware of.

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 Taiwanese 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.