Guangdong Yantang Dairy (SZSE:002732) earnings and shareholder returns have been trending downwards for the last three years, but the stock rallies 11% this past week

It is doubtless a positive to see that the Guangdong Yantang Dairy Co., Ltd. (SZSE:002732) share price has gained some 37% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 30% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

While the stock has risen 11% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Guangdong Yantang Dairy

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 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 the three years that the share price fell, Guangdong Yantang Dairy's earnings per share (EPS) dropped by 11% each year. The 11% average annual share price decline is remarkably close to the EPS decline. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Guangdong Yantang Dairy's earnings, revenue and cash flow.

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 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. As it happens, Guangdong Yantang Dairy's TSR for the last 3 years was -28%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Guangdong Yantang Dairy shareholders are down 3.6% for the year (even including dividends), but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Guangdong Yantang Dairy better, we need to consider many other factors. For example, we've discovered 2 warning signs for Guangdong Yantang Dairy that you should be aware of before investing here.

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.

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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.