We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the Shenzhen Investment Limited (HKG:604) share price managed to fall 65% over five long years. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 36% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.

Since Shenzhen Investment has shed HK$1.3b 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 Shenzhen 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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

In the last half decade Shenzhen Investment saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Shenzhen 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 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. In the case of Shenzhen Investment, it has a TSR of -50% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Shenzhen Investment shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 22%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. 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. 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 be aware of the 2 warning signs we've spotted with Shenzhen Investment .

Of course Shenzhen Investment may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.