The five-year decline in earnings for Zhejiang XCC GroupLtd SHSE:603667) isn't encouraging, but shareholders are still up 79% over that period

Zhejiang XCC Group Co.,Ltd (SHSE:603667) shareholders might be concerned after seeing the share price drop 24% in the last quarter. Looking further back, the stock has generated good profits over five years. Its return of 67% has certainly bested the market return!

While the stock has fallen 10% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Zhejiang XCC GroupLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Zhejiang XCC GroupLtd's earnings per share are down 1.2% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 1.4% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 17% per year is probably viewed as evidence that Zhejiang XCC GroupLtd is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Zhejiang XCC GroupLtd's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Zhejiang XCC GroupLtd's TSR for the last 5 years was 79%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that Zhejiang XCC GroupLtd returned a loss of 4.7% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 12% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Zhejiang XCC GroupLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Zhejiang XCC GroupLtd .

We will like Zhejiang XCC GroupLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.