In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Hang Lung Group Limited (HKG:10), since the last five years saw the share price fall 52%. We also note that the stock has performed poorly over the last year, with the share price down 26%.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Hang Lung Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years over which the share price declined, Hang Lung Group's earnings per share (EPS) dropped by 10% each year. This reduction in EPS is less than the 14% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 7.35 further reflects this reticence.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Hang Lung Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. As it happens, Hang Lung Group's TSR for the last 5 years was -40%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Hang Lung Group shareholders are down 22% over twelve months (even including dividends), which isn't far from the market return of -20%. So last year was actually even worse than the last five years, which cost shareholders 7% per year. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hang Lung Group (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Hang Lung Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.