Inner Mongolia Yili Industrial Group (SHSE:600887) shareholders have endured a 21% loss from investing in the stock three years ago

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Inner Mongolia Yili Industrial Group Co., Ltd. (SHSE:600887) shareholders have had that experience, with the share price dropping 29% in three years, versus a market decline of about 15%.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Inner Mongolia Yili Industrial Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the unfortunate three years of share price decline, Inner Mongolia Yili Industrial Group actually saw its earnings per share (EPS) improve by 8.3% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. It's good to see that Inner Mongolia Yili Industrial Group has increased its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Inner Mongolia Yili Industrial Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Inner Mongolia Yili Industrial Group stock, you should check out this free report showing analyst consensus estimates for future profits.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Inner Mongolia Yili Industrial Group the TSR over the last 3 years was -21%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Inner Mongolia Yili Industrial Group shareholders gained a total return of 10% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 1.5% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. Keeping this in mind, a solid next step might be to take a look at Inner Mongolia Yili Industrial Group's dividend track record. This free interactive graph is a great place to start.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.