The five-year loss for Tianjin Guifaxiang 18th Street Mahua FoodLtd (SZSE:002820) shareholders likely driven by its shrinking earnings

Tianjin Guifaxiang 18th Street Mahua Food Co.,Ltd. (SZSE:002820) shareholders should be happy to see the share price up 11% in the last week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 35%, which falls well short of the return you could get by buying an index fund.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for Tianjin Guifaxiang 18th Street Mahua FoodLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Looking back five years, both Tianjin Guifaxiang 18th Street Mahua FoodLtd's share price and EPS declined; the latter at a rate of 12% per year. The share price decline of 8% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Tianjin Guifaxiang 18th Street Mahua FoodLtd, it has a TSR of -29% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 6.0% in the twelve months, Tianjin Guifaxiang 18th Street Mahua FoodLtd shareholders did even worse, losing 22% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Tianjin Guifaxiang 18th Street Mahua FoodLtd is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course Tianjin Guifaxiang 18th Street Mahua FoodLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.