Shareholders in China Railway Hi-tech Industry (SHSE:600528) are in the red if they invested five years ago

While it may not be enough for some shareholders, we think it is good to see the China Railway Hi-tech Industry Corporation Limited (SHSE:600528) share price up 19% in a single quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 19%, which falls well short of the return you could get by buying an index fund.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for China Railway Hi-tech Industry

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.

During the five years over which the share price declined, China Railway Hi-tech Industry's earnings per share (EPS) dropped by 2.4% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 4% per year, over the period. This implies that the market was previously too optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on China Railway Hi-tech Industry'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Railway Hi-tech Industry, it has a TSR of -13% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that China Railway Hi-tech Industry shareholders have received a total shareholder return of 10% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 2% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand China Railway Hi-tech Industry 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 China Railway Hi-tech Industry (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.