It can certainly be frustrating when a stock does not perform as hoped. But it can difficult to make money in a declining market. The BOC Aviation Limited (HKG:2588) is down 19% over three years, but the total shareholder return is -10% once you include the dividend. That's better than the market which declined 18% over the last three years. The falls have accelerated recently, with the share price down 15% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 7.2% in the same timeframe.

After losing 3.8% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for BOC Aviation

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).

During five years of share price growth, BOC Aviation moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

We note that the dividend has declined - a likely contributor to the share price drop. It doesn't seem like the changes in revenue would have impacted the share price much, but a closer inspection of the data might reveal something.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

BOC Aviation is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for BOC Aviation in this interactive graph of future profit estimates.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of BOC Aviation, it has a TSR of -10% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in BOC Aviation had a tough year, with a total loss of 2.8% (including dividends), against a market gain of about 3.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 0.5%, each year, over five years. 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. Take risks, for example - BOC Aviation has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

But note: BOC Aviation may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.