Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. To wit, the The Bank of East Asia, Limited (HKG:23) share price managed to fall 65% over five long years. That's an unpleasant experience for long term holders.

While the stock has risen 3.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Bank of East Asia

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 Bank of East Asia's share price and EPS declined; the latter at a rate of 4.4% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 19% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 4.98 further reflects this reticence.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Bank of East Asia has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Bank of East Asia the TSR over the last 5 years was -55%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Bank of East Asia shares lost 6.4% throughout the year, that wasn't as bad as the market loss of 19%. Of far more concern is the 9% p.a. loss served to shareholders over the last five years. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. It's always interesting to track share price performance over the longer term. But to understand Bank of East Asia better, we need to consider many other factors. 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.

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 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.