We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Johnson Electric Holdings Limited (HKG:179) share price managed to fall 64% over five long years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 50% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.

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

See our latest analysis for Johnson Electric 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Looking back five years, both Johnson Electric Holdings' share price and EPS declined; the latter at a rate of 10% per year. This reduction in EPS is less than the 19% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 7.71 further reflects this reticence.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Johnson Electric Holdings' key metrics by checking this interactive graph of Johnson Electric Holdings's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Johnson Electric Holdings' TSR for the last 5 years was -60%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Johnson Electric Holdings shareholders are down 49% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 18%. 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 10% over the last half decade. 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. Even so, be aware that Johnson Electric Holdings is showing 3 warning signs in our investment analysis , you should know about...

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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.