China State Construction Development Holdings' (HKG:830) five-year total shareholder returns outpace the underlying earnings growth

China State Construction Development Holdings Limited (HKG:830) shareholders might be concerned after seeing the share price drop 11% in the last week. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 213% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 34% decline over the last twelve months.

Although China State Construction Development Holdings has shed HK$451m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for China State Construction Development Holdings

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.

Over half a decade, China State Construction Development Holdings managed to grow its earnings per share at 22% a year. This EPS growth is reasonably close to the 26% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how China State Construction Development Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling China State Construction Development Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, China State Construction Development Holdings' TSR for the last 5 years was 265%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in China State Construction Development Holdings had a tough year, with a total loss of 31% (including dividends), against a market gain of about 36%. 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 30%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand China State Construction Development Holdings better, we need to consider many other factors. Take risks, for example - China State Construction Development Holdings has 1 warning sign we think you should be aware of.

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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.