The three-year shareholder returns and company earnings persist lower as Jiangsu JIXIN Wind Energy Technology (SHSE:601218) stock falls a further 11% in past week

Jiangsu JIXIN Wind Energy Technology Co., Ltd. (SHSE:601218) shareholders should be happy to see the share price up 20% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 39% in the last three years, significantly under-performing the market.

Since Jiangsu JIXIN Wind Energy Technology has shed CN¥398m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Jiangsu JIXIN Wind Energy Technology

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 three years that the share price fell, Jiangsu JIXIN Wind Energy Technology's earnings per share (EPS) dropped by 28% each year. This fall in the EPS is worse than the 15% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

Dive deeper into Jiangsu JIXIN Wind Energy Technology's key metrics by checking this interactive graph of Jiangsu JIXIN Wind Energy Technology'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. 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. We note that for Jiangsu JIXIN Wind Energy Technology the TSR over the last 3 years was -35%, 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

Jiangsu JIXIN Wind Energy Technology shareholders are down 11% for the year (even including dividends), but the market itself is up 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Jiangsu JIXIN Wind Energy Technology has 3 warning signs (and 1 which can't be ignored) we think you should know about.

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.

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

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.