The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Perfect Group Corp., Ltd (SHSE:603059) shareholders for doubting their decision to hold, with the stock down 25% over a half decade. And the share price decline continued over the last week, dropping some 20%. But this could be related to the soft market, which is down about 9.4% in the same period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

During the unfortunate half decade during which the share price slipped, Perfect Group actually saw its earnings per share (EPS) improve by 0.5% 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). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.

The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 8.3% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that Perfect Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Perfect Group stock, you should check out this free report showing analyst profit 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Perfect Group's TSR for the last 5 years was -22%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, Perfect Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 20% wasn't as bad as the market loss of around 26%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 4% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand Perfect Group better, we need to consider many other factors. Even so, be aware that Perfect Group is showing 2 warning signs in our investment analysis , you should know about...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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