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Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Shenzhen Investment Limited (HKG:604) shareholders have had that experience, with the share price dropping 26% in three years, versus a market return of about 11%. There was little comfort for shareholders in the last week as the price declined a further 2.0%.
Check out our latest analysis for Shenzhen Investment
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Shenzhen Investment saw its EPS decline at a compound rate of 2.9% per year, over the last three years. The share price decline of 9.4% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 6.56.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Shenzhen Investment has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shenzhen Investment the TSR over the last 3 years was -11%, 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
It's good to see that Shenzhen Investment has rewarded shareholders with a total shareholder return of 20% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8.7% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Importantly, we haven't analysed Shenzhen Investment's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.