The three-year loss for Nantong Jiangshan Agrochemical & ChemicalsLtd (SHSE:600389) shareholders likely driven by its shrinking earnings

It is a pleasure to report that the Nantong Jiangshan Agrochemical & Chemicals Co.,Ltd. (SHSE:600389) is up 38% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 49% in the last three years, falling well short of the market return.

On a more encouraging note the company has added CN¥461m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Check out our latest analysis for Nantong Jiangshan Agrochemical & ChemicalsLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Nantong Jiangshan Agrochemical & ChemicalsLtd saw its EPS decline at a compound rate of 31% per year, over the last three years. In comparison the 20% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Nantong Jiangshan Agrochemical & ChemicalsLtd's key metrics by checking this interactive graph of Nantong Jiangshan Agrochemical & ChemicalsLtd's earnings, revenue and cash flow.

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 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, Nantong Jiangshan Agrochemical & ChemicalsLtd's TSR for the last 3 years was -45%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Nantong Jiangshan Agrochemical & ChemicalsLtd shareholders are down 12% for the year (even including dividends), but the market itself is up 8.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 Nantong Jiangshan Agrochemical & ChemicalsLtd is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

Of course Nantong Jiangshan Agrochemical & ChemicalsLtd 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.