The five-year loss for Topsports International Holdings (HKG:6110) shareholders likely driven by its shrinking earnings

Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. For example, after five long years the Topsports International Holdings Limited (HKG:6110) share price is a whole 69% lower. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 45% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 22% in thirty days.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

Our free stock report includes 1 warning sign investors should be aware of before investing in Topsports International Holdings. Read for free now.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Topsports International Holdings' earnings per share (EPS) dropped by 9.6% each year. This reduction in EPS is less than the 21% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 9.49.

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

It might be well worthwhile taking a look at our free report on Topsports International Holdings' earnings, revenue and cash flow.

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. We note that for Topsports International Holdings the TSR over the last 5 years was -56%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Topsports International Holdings shareholders are down 38% for the year (even including dividends), but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Topsports International Holdings .

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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.