Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don’t succeed. To wit, the The Hong Kong and China Gas Company Limited (HKG:3) share price managed to fall 60% over five long years. That’s not a lot of fun for true believers.

Since Hong Kong and China Gas has shed HK$3.5b from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.

View our latest analysis for Hong Kong and China Gas

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. 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 Hong Kong and China Gas’ share price and EPS declined; the latter at a rate of 8.3% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 17% per year, over the period. This implies that the market was previously too optimistic about the stock.

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

We know that Hong Kong and China Gas has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Hong Kong and China Gas will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Hong Kong and China Gas’ TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Hong Kong and China Gas shareholders are down 16% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand Hong Kong and China Gas better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for Hong Kong and China Gas that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.