In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term COFCO Capital Holdings Co., Ltd. (SZSE:002423) shareholders have had that experience, with the share price dropping 12% in three years, versus a market return of about 22%. On the other hand the share price has bounced 5.2% over the last week.

While the stock has risen 5.2% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Check out our latest analysis for COFCO Capital 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 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.

COFCO Capital Holdings saw its EPS decline at a compound rate of 2.9% per year, over the last three years. The share price decline of 4% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

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

Dive deeper into COFCO Capital Holdings' key metrics by checking this interactive graph of COFCO Capital Holdings's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, COFCO Capital Holdings' TSR for the last 3 years was -8.9%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

COFCO Capital Holdings produced a TSR of 6.2% over the last year. It's always nice to make money but this return falls short of the market return which was about 9.5% for the year. The silver lining is that the recent rise is far preferable to the annual loss of 2.9% that shareholders have suffered over the last three years. It could well be that the business is stabilizing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for COFCO Capital Holdings you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.