Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Emperor Entertainment Hotel Limited (HKG:296) shareholders have had that experience, with the share price dropping 44% in three years, versus a market return of about -8.5%. The more recent news is of little comfort, with the share price down 41% in a year. Shareholders have had an even rougher run lately, with the share price down 35% in the last 90 days. But this could be related to the weak market, which is down 18% in the same period.

See our latest analysis for Emperor Entertainment Hotel

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 unfortunate three years of share price decline, Emperor Entertainment Hotel actually saw its earnings per share (EPS) improve by 20% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. On the other hand, the uninspired reduction in revenue, at 6.1% each year, may have shareholders ditching the stock. In that case, the current EPS might be viewed by some as difficult to sustain.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Emperor Entertainment Hotel's TSR for the last 3 years was -35%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.