For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Hangzhou Hikvision Digital Technology Co., Ltd. (SZSE:002415) shareholders, since the share price is down 46% in the last three years, falling well short of the market decline of around 21%. And the share price decline continued over the last week, dropping some 8.8%. However, this move may have been influenced by the broader market, which fell 4.7% in that time.

If the past week is anything to go by, investor sentiment for Hangzhou Hikvision Digital Technology isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Hangzhou Hikvision Digital Technology

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 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).

Hangzhou Hikvision Digital Technology saw its EPS decline at a compound rate of 0.5% per year, over the last three years. This reduction in EPS is slower than the 19% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

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

It might be well worthwhile taking a look at our free report on Hangzhou Hikvision Digital Technology's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Hangzhou Hikvision Digital Technology the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Although it hurts that Hangzhou Hikvision Digital Technology returned a loss of 2.3% in the last twelve months, the broader market was actually worse, returning a loss of 13%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Hangzhou Hikvision Digital Technology better, we need to consider many other factors. For instance, we've identified 1 warning sign for Hangzhou Hikvision Digital Technology that you should be aware of.

Of course Hangzhou Hikvision Digital Technology 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.