It can certainly be frustrating when a stock does not perform as hoped. But it's hard to avoid some disappointing investments when the overall market is down. The Hang Zhou Iron & Steel Co.,Ltd. (SHSE:600126) is down 19% over three years, but the total shareholder return is -13% once you include the dividend. And that total return actually beats the market decline of 25%. It's down 24% in about a quarter.

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.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Hang Zhou Iron & SteelLtd's earnings per share (EPS) dropped by 49% each year. This fall in the EPS is worse than the 7% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 76.33.

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

Dive deeper into Hang Zhou Iron & SteelLtd's key metrics by checking this interactive graph of Hang Zhou Iron & SteelLtd'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 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, Hang Zhou Iron & SteelLtd's TSR for the last 3 years was -13%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's never nice to take a loss, Hang Zhou Iron & SteelLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 5.7% wasn't as bad as the market loss of around 16%. Longer term investors wouldn't be so upset, since they would have made 1.8%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Hang Zhou Iron & SteelLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Hang Zhou Iron & SteelLtd , and understanding them should be part of your investment process.

Of course Hang Zhou Iron & SteelLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com