If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Midea Real Estate Holding Limited (HKG:3990) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 74% decline in the share price in that time. And over the last year the share price fell 57%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 23% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years that the share price fell, Midea Real Estate Holding's earnings per share (EPS) dropped by 44% each year. This change in EPS is reasonably close to the 36% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Midea Real Estate Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Midea Real Estate Holding the TSR over the last 3 years was -65%, 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

While the broader market lost about 15% in the twelve months, Midea Real Estate Holding shareholders did even worse, losing 53% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Midea Real Estate Holding is showing 3 warning signs in our investment analysis , you should know about...

Midea Real Estate Holding is not the only stock that insiders are buying. 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.