We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the Central China Securities Co., Ltd. (HKG:1375) share price is a whole 68% lower. That is extremely sub-optimal, to say the least. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days. Of course, this share price action may well have been influenced by the 13% decline in the broader market, throughout the period.

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

View our latest analysis for Central China Securities

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years over which the share price declined, Central China Securities' earnings per share (EPS) dropped by 13% each year. This reduction in EPS is less than the 21% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 9.46 further reflects this reticence.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Central China Securities' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Central China Securities' TSR for the last 5 years was -64%, 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

While it's certainly disappointing to see that Central China Securities shares lost 8.8% throughout the year, that wasn't as bad as the market loss of 25%. What is more upsetting is the 10% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand Central China Securities better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Central China Securities (including 2 which are a bit concerning) .

Of course Central China Securities may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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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.