Chengdu Leejun Industrial (SZSE:002651) shareholders notch a 11% CAGR over 5 years, yet earnings have been shrinking

It hasn't been the best quarter for Chengdu Leejun Industrial Co., Ltd. (SZSE:002651) shareholders, since the share price has fallen 16% in that time. On the bright side the returns have been quite good over the last half decade. Its return of 61% has certainly bested the market return! Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 32% decline over the last three years: that's a long time to wait for profits.

Since it's been a strong week for Chengdu Leejun Industrial shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Chengdu Leejun Industrial

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Chengdu Leejun Industrial actually saw its EPS drop 34% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.6% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 7.8% per year is probably viewed as evidence that Chengdu Leejun Industrial is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Chengdu Leejun Industrial's TSR for the last 5 years was 69%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Chengdu Leejun Industrial shareholders have received a total shareholder return of 33% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For instance, we've identified 4 warning signs for Chengdu Leejun Industrial (1 shouldn't be ignored) that you should be aware of.

But note: Chengdu Leejun Industrial may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.