Pulling back 9.8% this week, Fushun Special SteelLTD's SHSE:600399) five-year decline in earnings may be coming into investors focus

It might be of some concern to shareholders to see the Fushun Special Steel Co.,LTD. (SHSE:600399) share price down 15% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 128% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 34% decline over the last twelve months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Fushun Special SteelLTD

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Fushun Special SteelLTD actually saw its EPS drop 34% per year.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 0.8% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 9.3% per year is probably viewed as evidence that Fushun Special SteelLTD is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Fushun Special SteelLTD has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Fushun Special SteelLTD

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fushun Special SteelLTD's TSR for the last 5 years was 130%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 6.2% in the last year, Fushun Special SteelLTD shareholders lost 33% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 1 warning sign for Fushun Special SteelLTD that you should be aware of before investing here.

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.