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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by China Oriental Group Company Limited (HKG:581) shareholders over the last year, as the share price declined 42%. That's well bellow the market return of 9.9%. China Oriental Group may have better days ahead, of course; we've only looked at a one year period. There was little comfort for shareholders in the last week as the price declined a further 2.9%.
View our latest analysis for China Oriental Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Unfortunately China Oriental Group reported an EPS drop of 43% for the last year. This change in EPS is remarkably close to the 42% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that China Oriental Group has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of China Oriental Group, it has a TSR of -36% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Given that the market gained 9.9% in the last year, China Oriental Group shareholders might be miffed that they lost 36% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 3.8% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. 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. For instance, we've identified 3 warning signs for China Oriental Group that you should be aware of.