Guangzhou Rural Commercial Bank (HKG:1551) investors are sitting on a loss of 37% if they invested five years ago

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Guangzhou Rural Commercial Bank Co., Ltd. (HKG:1551) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. The falls have accelerated recently, with the share price down 12% in the last three months. But this could be related to the weak market, which is down 5.9% in the same period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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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.

During the five years over which the share price declined, Guangzhou Rural Commercial Bank's earnings per share (EPS) dropped by 29% each year. This fall in the EPS is worse than the 13% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Guangzhou Rural Commercial Bank's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Guangzhou Rural Commercial Bank the TSR over the last 5 years was -37%, 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

Investors in Guangzhou Rural Commercial Bank had a tough year, with a total loss of 6.0% (including dividends), against a market gain of about 33%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Guangzhou Rural Commercial Bank better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Guangzhou Rural Commercial Bank (of which 1 is a bit unpleasant!) you should know about.

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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.