Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term Shanghai Lingang Holdings Co.,Ltd. (SHSE:600848) shareholders for doubting their decision to hold, with the stock down 45% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 22% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.

With the stock having lost 6.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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 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.

Looking back five years, both Shanghai Lingang HoldingsLtd's share price and EPS declined; the latter at a rate of 6.1% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 11% per year, over the period. So it seems the market was too confident about the business, in the past.

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

We know that Shanghai Lingang HoldingsLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Shanghai Lingang HoldingsLtd will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Shanghai Lingang HoldingsLtd's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While it's certainly disappointing to see that Shanghai Lingang HoldingsLtd shares lost 20% throughout the year, that wasn't as bad as the market loss of 26%. Given the total loss of 7% per year over five years, it seems returns have deteriorated in the last twelve months. 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. 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. Even so, be aware that Shanghai Lingang HoldingsLtd is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Of course Shanghai Lingang HoldingsLtd 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.

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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.