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. We regret to report that long term Dexin China Holdings Company Limited (HKG:2019) shareholders have had that experience, with the share price dropping 44% in three years, versus a market decline of about 2.4%. And the ride hasn't got any smoother in recent times over the last year, with the price 36% lower in that time. The falls have accelerated recently, with the share price down 36% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Dexin China Holdings has shed CN¥432m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Dexin China Holdings

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 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.

During the three years that the share price fell, Dexin China Holdings' earnings per share (EPS) dropped by 24% each year. In comparison the 17% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Dexin China Holdings' 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). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Dexin China Holdings the TSR over the last 3 years was -35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

The last twelve months weren't great for Dexin China Holdings shares, which performed worse than the market, costing holders 33%, including dividends. Meanwhile, the broader market slid about 19%, likely weighing on the stock. Shareholders have lost 10% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It's always interesting to track share price performance over the longer term. But to understand Dexin China Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Dexin China Holdings (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

We will like Dexin China Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.