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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 in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Jiahua Stores Holdings Limited (HKG:602) shareholders, since the share price is down 55% in the last three years, falling well short of the market return of around 20%. Unhappily, the share price slid 1.2% in the last week.
See our latest analysis for Jiahua Stores Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, Jiahua Stores Holdings's earnings per share (EPS) dropped by 33% each year. In comparison the 23% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Jiahua Stores Holdings's key metrics by checking this interactive graph of Jiahua Stores Holdings's earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Jiahua Stores Holdings, it has a TSR of -45% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 3.2% in the last year, Jiahua Stores Holdings shareholders lost 13% (even including dividends) . Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2.6% over the last half decade. 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. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Jiahua Stores Holdings (of which 1 is a bit concerning!) you should know about.