The last three months have been tough on Hi-P International Limited (SGX:H17) shareholders, who have seen the share price decline a rather worrying 40%. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 52% in that time.

See our latest analysis for Hi-P International

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Hi-P International achieved compound earnings per share (EPS) growth of 51% per year. The EPS growth is more impressive than the yearly share price gain of 8.8% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 9.45 also suggests market apprehension.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. We note that for Hi-P International the TSR over the last 5 years was 99%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 22% in the twelve months, Hi-P International shareholders did even worse, losing 31% (even including dividends) . 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. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Hi-P International has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.