No-one enjoys it when they lose money on a stock. But it can difficult to make money in a declining market. The Sun Hung Kai & Co. Limited (HKG:86) is down 41% over three years, but the total shareholder return is -24% once you include the dividend. That's better than the market which declined 25% over the last three years. The last week also saw the share price slip down another 11%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Sun Hung Kai has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 3.7% each year, over three years. This could have some investors worried about the longer term growth potential (or lack thereof).

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Sun Hung Kai will earn in the future (free profit 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. 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. In the case of Sun Hung Kai, it has a TSR of -24% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 11% in the twelve months, Sun Hung Kai shareholders did even worse, losing 13% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.5% 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. For example, we've discovered 1 warning sign for Sun Hung Kai that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.