Despite the downward trend in earnings at Wuhan Sante Cableway Group (SZSE:002159) the stock pops 14%, bringing three-year gains to 38%

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Wuhan Sante Cableway Group Co., Ltd. (SZSE:002159) share price is up 36% in the last three years, clearly besting the market decline of around 30% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 0.6%, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Wuhan Sante Cableway Group

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 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.

Over the last three years, Wuhan Sante Cableway Group failed to grow earnings per share, which fell 3.8% (annualized).

Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. Therefore, it makes sense to look into other metrics.

The modest 1.5% dividend yield is unlikely to be propping up the share price. It may well be that Wuhan Sante Cableway Group revenue growth rate of 18% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

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

We know that Wuhan Sante Cableway Group has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Wuhan Sante Cableway Group will earn in the future (free profit forecasts).

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Wuhan Sante Cableway Group's TSR for the last 3 years was 38%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Wuhan Sante Cableway Group shareholders have received a total shareholder return of 0.6% over the last year. And that does include the dividend. Having said that, the five-year TSR of 3% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. To that end, you should be aware of the 1 warning sign we've spotted with Wuhan Sante Cableway Group .

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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.