Even though Zhongman Petroleum and Natural Gas GroupLtd (SHSE:603619) has lost CN¥840m market cap in last 7 days, shareholders are still up 155% over 3 years

It hasn't been the best quarter for Zhongman Petroleum and Natural Gas Group Corp.,Ltd. (SHSE:603619) shareholders, since the share price has fallen 22% in that time. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 142% higher: a great result. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

In light of the stock dropping 9.0% 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 three-year return.

See our latest analysis for Zhongman Petroleum and Natural Gas GroupLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Zhongman Petroleum and Natural Gas GroupLtd moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Zhongman Petroleum and Natural Gas GroupLtd has grown profits over the years, but the future is more important for shareholders. This free interactive report on Zhongman Petroleum and Natural Gas GroupLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Zhongman Petroleum and Natural Gas GroupLtd's TSR for the last 3 years was 155%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Zhongman Petroleum and Natural Gas GroupLtd shareholders have received a total shareholder return of 7.8% over the last year. Of course, that includes the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Zhongman Petroleum and Natural Gas GroupLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Zhongman Petroleum and Natural Gas GroupLtd you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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

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