The total return for Shandong Swan CottonIndustrial Machinery StockLtd (SHSE:603029) investors has risen faster than earnings growth over the last three years

Shandong Swan CottonIndustrial Machinery Stock Co.,Ltd. (SHSE:603029) shareholders have seen the share price descend 19% over the month. But over three years, the returns would have left most investors smiling To wit, the share price did better than an index fund, climbing 38% during that period.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Shandong Swan CottonIndustrial Machinery StockLtd

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 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).

Shandong Swan CottonIndustrial Machinery StockLtd was able to grow its EPS at 35% per year over three years, sending the share price higher. The average annual share price increase of 11% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

It might be well worthwhile taking a look at our free report on Shandong Swan CottonIndustrial Machinery StockLtd's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Shandong Swan CottonIndustrial Machinery StockLtd's TSR for the last 3 years was 42%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Shandong Swan CottonIndustrial Machinery StockLtd had a tough year, with a total loss of 26% (including dividends), against a market gain of about 6.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Shandong Swan CottonIndustrial Machinery StockLtd better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Shandong Swan CottonIndustrial Machinery StockLtd (including 1 which is concerning) .

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.