Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Shanghai Waigaoqiao Free Trade Zone Group Co., Ltd. (SHSE:600648) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. And some of the more recent buyers are probably worried, too, with the stock falling 24% in the last year. But it's up 6.5% in the last week.

On a more encouraging note the company has added CN¥636m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both Shanghai Waigaoqiao Free Trade Zone Group's share price and EPS declined; the latter at a rate of 1.8% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 13% per year, over the period. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 11.17.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Shanghai Waigaoqiao Free Trade Zone Group's key metrics by checking this interactive graph of Shanghai Waigaoqiao Free Trade Zone Group's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Shanghai Waigaoqiao Free Trade Zone Group's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Shanghai Waigaoqiao Free Trade Zone Group shareholders are down 21% over twelve months (even including dividends), which isn't far from the market return of -20%. So last year was actually even worse than the last five years, which cost shareholders 7% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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. Take risks, for example - Shanghai Waigaoqiao Free Trade Zone Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

We will like Shanghai Waigaoqiao Free Trade Zone Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com