The one-year decline in earnings for Ningbo Shenglong Automotive Powertrain SystemLtd SHSE:603178) isn't encouraging, but shareholders are still up 148% over that period

Ningbo Shenglong Automotive Powertrain System Co.,Ltd. (SHSE:603178) shareholders might understandably be very concerned that the share price has dropped 34% in the last quarter. Despite this, the stock is a strong performer over the last year, no doubt about that. Like an eagle, the share price soared 146% in that time. So it may be that the share price is simply cooling off after a strong rise. Investors should be wondering whether the business itself has the fundamental value required to continue to drive gains.

While the stock has fallen 7.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Ningbo Shenglong Automotive Powertrain SystemLtd

While Ningbo Shenglong Automotive Powertrain SystemLtd made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over the last twelve months, Ningbo Shenglong Automotive Powertrain SystemLtd's revenue grew by 3.5%. That's not a very high growth rate considering it doesn't make profits. In contrast, the share price took off during the year, gaining 146%. We're happy that investors have made money, though we wonder if the increase will be sustained. It's quite likely that the market is considering other factors, not just revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Take a more thorough look at Ningbo Shenglong Automotive Powertrain SystemLtd's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Ningbo Shenglong Automotive Powertrain SystemLtd the TSR over the last 1 year was 148%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Ningbo Shenglong Automotive Powertrain SystemLtd shareholders have received a total shareholder return of 148% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Ningbo Shenglong Automotive Powertrain SystemLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Ningbo Shenglong Automotive Powertrain SystemLtd , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese 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.