Despite the downward trend in earnings at FAWER Automotive Parts Limited (SZSE:000030) the stock climbs 5.1%, bringing five-year gains to 46%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the FAWER Automotive Parts Limited share price has climbed 17% in five years, easily topping the market decline of 0.02% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.1% in the last year, including dividends.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for FAWER Automotive Parts Limited

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

FAWER Automotive Parts Limited's earnings per share are down 3.5% per year, despite strong share price performance over five years.

Since EPS is down a bit, and the share price is up, it's probably that the market previously had some concerns about the company, but the reality has been better than feared. In the long term, though, it will be hard for the share price rises to continue without improving EPS.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, FAWER Automotive Parts Limited's TSR for the last 5 years was 46%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that FAWER Automotive Parts Limited shareholders have received a total shareholder return of 1.1% over one year. And that does include the dividend. However, the TSR over five years, coming in at 8% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for FAWER Automotive Parts Limited you should be aware of, and 1 of them shouldn't be ignored.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com