For many investors, the main purpose of stock picking is to generate higher returns than the overall market. But in any portfolio, there may be some stocks that fall below this benchmark. Unfortunately, this is the case for the long-term shareholders of Sun Hung Kai Properties Limited (HKG: 16), as the stock price has fallen by 11% in the past three years, which is far below the market rate of return of around 16%.

Let us now look at the fundamentals of the company and see if long-term shareholder returns match the performance of the underlying business.

View our latest analysis of Sun Hung Kai Properties

To paraphrase Benjamin Graham's words: In the short term the market is a voting machine, but in the long term it is a weighing machine. One way to check how market sentiment changes over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

In the three years that the stock price has fallen, Sun Hung Kai Properties’ earnings per share (EPS) has fallen by 19% every year. The drop in earnings per share is worse than the compound annual stock price drop of 4%. Therefore, despite previous disappointments, shareholders must be confident that the situation will improve in the long run.

The figure below depicts how the EPS changes over time (by clicking on the image to show the exact value).

It may be worth noting that we saw a lot of insider buying in the last quarter, which we think is positive. In other words, we believe that earnings and revenue growth trends are more important considerations. Before buying and selling stocks, we always recommend to carefully check the historical growth trend, which is available here.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and stock price return. TSR is a return calculation that takes into account the value of cash dividends (assuming that any dividends received are reinvested) and the calculated value of any discounted financing and splits. It is fair to say that TSR provides a more complete picture of dividend-paying stocks. For Sun Hung Kai Properties, its TSR for the past 3 years was 2.0%. This exceeds the stock price return we mentioned earlier. The company's dividends thus increase the total shareholder return.

Shareholders of Sun Hung Kai Properties fell 2.1% for the year (even including dividends), but the market itself rose 0.9%. Even the stock prices of good stocks sometimes fall, but we hope to see improvements in basic corporate indicators before we become too interested. On the bright side, long-term shareholders have already made money, with an annual growth rate of 4% over the past five years. If fundamental data continue to show long-term sustainable growth, then the current sell-off may be an opportunity worth considering. Investors who like to make money usually check internal purchases, such as the price paid and the total amount of the purchase. You can click this link to learn about insider trading of Sun Hung Kai Properties.

Sun Hung Kai Properties is not the only stock purchased by insiders. So take a look at this list of free growth companies with insider buying.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on the Hong Kong Stock Exchange.

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