Investors are understandably disappointed when a stock they own declines in value. But no-one can make money on every call, especially in a declining market. While the Chongqing Water Group Co.,Ltd. (SHSE:601158) share price is down 24% in the last three years, the total return to shareholders (which includes dividends) was -13%. And that total return actually beats the market decline of 17%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Chongqing Water GroupLtd's earnings per share (EPS) dropped by 45% each year. This fall in the EPS is worse than the 9% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 63.14.

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 Chongqing Water GroupLtd'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 Chongqing Water GroupLtd the TSR over the last 3 years was -13%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Chongqing Water GroupLtd had a tough year, with a total loss of 12% (including dividends), against a market gain of about 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 4 warning signs for Chongqing Water GroupLtd (2 are potentially serious!) that you should be aware of before investing here.

We will like Chongqing Water GroupLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.