Despite lower earnings than five years ago, China Aerospace Times Electronics (SHSE:600879) investors are up 20% since then

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term China Aerospace Times Electronics CO., LTD. (SHSE:600879) shareholders have enjoyed a 18% share price rise over the last half decade, well in excess of the market return of around 12% (not including dividends).

Although China Aerospace Times Electronics has shed CN¥957m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for China Aerospace Times Electronics

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During five years of share price growth, China Aerospace Times Electronics actually saw its EPS drop 2.0% per year.

With EPS falling, but a modestly increasing share price, it seems that the market was probably too pessimistic about the stock in the past. Having said that, if the EPS falls continue we'd be surprised to see a sustained increase in share price.

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

Dive deeper into China Aerospace Times Electronics' key metrics by checking this interactive graph of China Aerospace Times Electronics's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Aerospace Times Electronics' TSR for the last 5 years was 20%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The total return of 8.6% received by China Aerospace Times Electronics shareholders over the last year isn't far from the market return of -8.9%. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand China Aerospace Times Electronics better, we need to consider many other factors. For example, we've discovered 2 warning signs for China Aerospace Times Electronics that you should be aware of before investing here.

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.