Earnings growth of 2.9% over 5 years hasn't been enough to translate into positive returns for QiaoYin City Management (SZSE:002973) shareholders

While not a mind-blowing move, it is good to see that the QiaoYin City Management Co., Ltd. (SZSE:002973) share price has gained 24% in the last three months. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 46% in that half decade.

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

See our latest analysis for QiaoYin City Management

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 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).

During the unfortunate half decade during which the share price slipped, QiaoYin City Management actually saw its earnings per share (EPS) improve by 15% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We don't think that the 0.8% is big factor in the share price, since it's quite small, as dividends go. In contrast to the share price, revenue has actually increased by 12% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on QiaoYin City Management's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that QiaoYin City Management has rewarded shareholders with a total shareholder return of 43% in the last twelve months. That's including the dividend. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Case in point: We've spotted 2 warning signs for QiaoYin City Management you should be aware of, and 1 of them is significant.

But note: QiaoYin City Management 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.