As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Gemdale Properties and Investment Corporation Limited (HKG:535) shareholders have had that experience, with the share price dropping 29% in three years, versus a market decline of about 3.5%. On top of that, the share price is down 7.2% in the last week. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

After losing 7.2% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Gemdale Properties and Investment

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the unfortunate three years of share price decline, Gemdale Properties and Investment actually saw its earnings per share (EPS) improve by 11% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. It's good to see that Gemdale Properties and Investment has increased its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Gemdale Properties and Investment's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Gemdale Properties and Investment's TSR for the last 3 years was -8.7%, 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 Gemdale Properties and Investment shares lost 12% throughout the year, that wasn't as bad as the market loss of 21%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 0.9% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. To that end, you should learn about the 3 warning signs we've spotted with Gemdale Properties and Investment (including 1 which is a bit concerning) .

Gemdale Properties and Investment is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.