Ningbo Huaxiang Electronic (SZSE:002048) earnings and shareholder returns have been trending downwards for the last three years, but the stock rallies 3.8% this past week

One of the frustrations of investing is when a stock goes down. But no-one can make money on every call, especially in a declining market. While the Ningbo Huaxiang Electronic Co., Ltd. (SZSE:002048) share price is down 33% in the last three years, the total return to shareholders (which includes dividends) was -17%. That's better than the market which declined 26% over the last three years.

While the stock has risen 3.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Ningbo Huaxiang Electronic

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Ningbo Huaxiang Electronic saw its EPS decline at a compound rate of 6.6% per year, over the last three years. This reduction in EPS is slower than the 13% annual reduction in the share price. 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 10.33.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ningbo Huaxiang Electronic the TSR over the last 3 years was -17%, 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 Ningbo Huaxiang Electronic has rewarded shareholders with a total shareholder return of 3.8% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 10% 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. It's always interesting to track share price performance over the longer term. But to understand Ningbo Huaxiang Electronic better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ningbo Huaxiang Electronic you should know about.

But note: Ningbo Huaxiang Electronic may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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