For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in The Hong Kong and China Gas Company Limited (HKG:3), since the last five years saw the share price fall 57%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Hong Kong and China Gas

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.

Looking back five years, both Hong Kong and China Gas' share price and EPS declined; the latter at a rate of 8.3% per year. This reduction in EPS is less than the 16% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Hong Kong and China Gas has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Hong Kong and China Gas, it has a TSR of -49% for the last 5 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 lost about 16% in the twelve months, Hong Kong and China Gas shareholders did even worse, losing 18% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% 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. It's always interesting to track share price performance over the longer term. But to understand Hong Kong and China Gas better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Hong Kong and China Gas you should be aware of.

We will like Hong Kong and China Gas better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.