Earnings growth of 1.2% over 5 years hasn't been enough to translate into positive returns for Shanghai YongLi Belting (SZSE:300230) shareholders

The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Shanghai YongLi Belting Co., Ltd (SZSE:300230), since the last five years saw the share price fall 22%. Even worse, it's down 18% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 7.2% in the same time period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Shanghai YongLi Belting

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 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).

Shanghai YongLi Belting became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

Arguably, the revenue drop of 12% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.

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

If you are thinking of buying or selling Shanghai YongLi Belting stock, you should check out this FREE detailed 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). 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. In the case of Shanghai YongLi Belting, it has a TSR of -11% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Shanghai YongLi Belting shareholders have received returns of 6.3% over twelve months (even including dividends), which isn't far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 2% over the last five years. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. 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. Take risks, for example - Shanghai YongLi Belting has 2 warning signs we think you should be aware of.

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.