For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Hang Seng Bank Limited (HKG:11) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. Furthermore, it's down 17% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 7.0% decline in the broader market, throughout the period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Looking back five years, both Hang Seng Bank's share price and EPS declined; the latter at a rate of 6.6% 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. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 10.04 further reflects this reticence.

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

We know that Hang Seng Bank has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hang Seng Bank the TSR over the last 5 years was -29%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Hang Seng Bank shareholders gained a total return of 1.0% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 5% per year, over five years. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Hang Seng Bank you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.