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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Zhongmin Baihui Retail Group Ltd. (SGX:5SR) shareholders for doubting their decision to hold, with the stock down 23% over a half decade.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Zhongmin Baihui Retail Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years over which the share price declined, Zhongmin Baihui Retail Group's earnings per share (EPS) dropped by 10% each year. The share price decline of 5% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Zhongmin Baihui Retail Group's key metrics by checking this interactive graph of Zhongmin Baihui Retail Group's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Zhongmin Baihui Retail Group's TSR for the last 5 years was -14%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 21% in the last year, Zhongmin Baihui Retail Group shareholders lost 14% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Zhongmin Baihui Retail Group is showing 5 warning signs in our investment analysis , and 3 of those are a bit concerning...