The total return for Xueda (Xiamen) Education Technology Group (SZSE:000526) investors has risen faster than earnings growth over the last five years

Xueda (Xiamen) Education Technology Group Co., Ltd (SZSE:000526) shareholders have seen the share price descend 17% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 128% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

In light of the stock dropping 14% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Xueda (Xiamen) Education Technology Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Xueda (Xiamen) Education Technology Group achieved compound earnings per share (EPS) growth of 66% per year. This EPS growth is higher than the 18% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

A Different Perspective

We're pleased to report that Xueda (Xiamen) Education Technology Group shareholders have received a total shareholder return of 94% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. 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. Take risks, for example - Xueda (Xiamen) Education Technology Group has 1 warning sign we think you should be aware of.

We will like Xueda (Xiamen) Education Technology Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com