While not a mind-blowing move, it is good to see that the Hang Seng Bank Limited (HKG:11) share price has gained 21% in the last three months. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 53% in that half decade.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

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 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 five years over which the share price declined, Hang Seng Bank's earnings per share (EPS) dropped by 6.4% 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 10.80 further reflects this reticence.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Hang Seng Bank has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Hang Seng Bank will grow revenue in the future.

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. In the case of Hang Seng Bank, it has a TSR of -41% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The total return of 8.8% received by Hang Seng Bank shareholders over the last year isn't far from the market return of -9.2%. Worse still, the company has lost shareholders 7% per year over five years. Generally speaking we'd prefer see an improvement in the fundamental metrics before becoming enthusiastic about the stock. 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. Case in point: We've spotted 1 warning sign for Hang Seng Bank you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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