Moon Environment TechnologyLtd (SZSE:000811) sheds 5.0% this week, as yearly returns fall more in line with earnings growth

Moon Environment Technology Co.,Ltd. (SZSE:000811) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. After all, the share price is up a market-beating 32% in that time.

Although Moon Environment TechnologyLtd has shed CN¥428m 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 Moon Environment TechnologyLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Moon Environment TechnologyLtd was able to grow its EPS at 32% per year over three years, sending the share price higher. The average annual share price increase of 10% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

It is of course excellent to see how Moon Environment TechnologyLtd has grown profits over the years, but the future is more important for shareholders. This free interactive report on Moon Environment TechnologyLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Moon Environment TechnologyLtd the TSR over the last 3 years was 37%, 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

While the broader market lost about 9.6% in the twelve months, Moon Environment TechnologyLtd shareholders did even worse, losing 25% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Moon Environment TechnologyLtd is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.