We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the The Bank of East Asia, Limited (HKG:23) share price is a whole 63% lower. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 23% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 10% in the same timeframe.

Since Bank of East Asia has shed HK$1.1b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Bank of East Asia

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years over which the share price declined, Bank of East Asia's earnings per share (EPS) dropped by 4.5% each year. This reduction in EPS is less than the 18% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 5.09 further reflects this reticence.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Bank of East Asia has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Bank of East Asia will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bank of East Asia's TSR for the last 5 years was -53%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Bank of East Asia shareholders have received a total shareholder return of 24% over the last year. And that does include the dividend. That certainly beats the loss of about 9% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Bank of East Asia , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.