Investors more bullish on Moso Power Supply TechnologyLtd (SZSE:002660) this week as stock pops 11%, despite earnings trending downwards over past three years

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Moso Power Supply Technology Co.,Ltd (SZSE:002660) share price is up 43% in the last three years, clearly besting the market decline of around 12% (not including dividends).

Since the stock has added CN¥385m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Moso Power Supply TechnologyLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, Moso Power Supply TechnologyLtd actually saw its earnings per share (EPS) drop 5.5% per year.

So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.

The modest 0.9% dividend yield is unlikely to be propping up the share price. You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 10.0% per year). The only thing that's clear is there is low correlation between Moso Power Supply TechnologyLtd's share price and its historic fundamental data. Further research may be required!

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at Moso Power Supply TechnologyLtd's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Moso Power Supply TechnologyLtd the TSR over the last 3 years was 46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Moso Power Supply TechnologyLtd has rewarded shareholders with a total shareholder return of 39% in the last twelve months. And that does include the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 3 warning signs for Moso Power Supply TechnologyLtd (1 is a bit unpleasant!) that you should be aware of before investing here.

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.

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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.