Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Zhejiang Communications Technology Co., Ltd. (SZSE:002061) shareholders for doubting their decision to hold, with the stock down 45% over a half decade.

With the stock having lost 4.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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 five years over which the share price declined, Zhejiang Communications Technology's earnings per share (EPS) dropped by 7.1% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 11% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 6.86 further reflects this reticence.

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

This free interactive report on Zhejiang Communications Technology's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Zhejiang Communications Technology the TSR over the last 5 years was -38%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Zhejiang Communications Technology shareholders are down 12% over twelve months (even including dividends), which isn't far from the market return of -13%. So last year was actually even worse than the last five years, which cost shareholders 7% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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. For example, we've discovered 2 warning signs for Zhejiang Communications Technology that you should be aware of before investing here.

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 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.