The five-year loss for XIANGPIAOPIAO FoodLtd (SHSE:603711) shareholders likely driven by its shrinking earnings

XIANGPIAOPIAO Food Co.,Ltd (SHSE:603711) shareholders will doubtless be very grateful to see the share price up 48% in the last quarter. 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 34% in that half decade.

While the last five years has been tough for XIANGPIAOPIAO FoodLtd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for XIANGPIAOPIAO FoodLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years over which the share price declined, XIANGPIAOPIAO FoodLtd's earnings per share (EPS) dropped by 4.1% each year. This reduction in EPS is less than the 8% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, XIANGPIAOPIAO FoodLtd's TSR for the last 5 years was -29%, 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 XIANGPIAOPIAO FoodLtd shareholders have received a total shareholder return of 12% over the last year. That's including the dividend. That certainly beats the loss of about 5% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for XIANGPIAOPIAO FoodLtd you should know about.

But note: XIANGPIAOPIAO FoodLtd 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.