Jiangsu Yunyi ElectricLtd (SZSE:300304) sheds 8.6% this week, as yearly returns fall more in line with earnings growth

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Jiangsu Yunyi Electric Co.,Ltd. (SZSE:300304) share price is up 78% in the last 5 years, clearly besting the market return of around 14% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 47% , including dividends .

Since the long term performance has been good but there's been a recent pullback of 8.6%, let's check if the fundamentals match the share price.

See our latest analysis for Jiangsu Yunyi ElectricLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Jiangsu Yunyi ElectricLtd achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is higher than the 12% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Jiangsu Yunyi ElectricLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Jiangsu Yunyi ElectricLtd's TSR for the last 5 years was 87%, 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 Jiangsu Yunyi ElectricLtd shareholders have received a total shareholder return of 47% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we've discovered 2 warning signs for Jiangsu Yunyi ElectricLtd (1 is significant!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.