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As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Hainan Meilan International Airport Company Limited (HKG:357) shareholders, since the share price is down 33% in the last three years, falling well short of the market return of around 30%. The good news is that the stock is up 2.6% in the last week.
See our latest analysis for Hainan Meilan International Airport
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).
Although the share price is down over three years, Hainan Meilan International Airport actually managed to grow EPS by 4.5% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It looks to us like the market was probably too optimistic around growth three years ago. But it's possible a look at other metrics will be enlightening.
Revenue is actually up 14% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Hainan Meilan International Airport further; while we may be missing something on this analysis, there might also be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Hainan Meilan International Airport stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Hainan Meilan International Airport's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Hainan Meilan International Airport's TSR of was a loss of 29% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Hainan Meilan International Airport had a tough year, with a total loss of 18%, against a market gain of about 10.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.