Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example, after five long years the Guotai Junan International Holdings Limited (HKG:1788) share price is a whole 62% lower. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 27% in the last year. And the share price decline continued over the last week, dropping some 7.1%.

After losing 7.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Guotai Junan International Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 Guotai Junan International Holdings' share price and EPS declined; the latter at a rate of 4.1% per year. This reduction in EPS is less than the 17% 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 7.95 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).

This free interactive report on Guotai Junan International Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Guotai Junan International Holdings' TSR for the last 5 years was -51%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 18% in the twelve months, Guotai Junan International Holdings shareholders did even worse, losing 24% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Guotai Junan International Holdings better, we need to consider many other factors. Take risks, for example - Guotai Junan International Holdings has 1 warning sign we think you should be aware of.

We will like Guotai Junan International 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.