Despite the downward trend in earnings at GuiZhouYongJi PrintingLtd (SHSE:603058) the stock spikes 13%, bringing three-year gains to 31%

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at GuiZhouYongJi Printing Co.,Ltd (SHSE:603058), which is up 18%, over three years, soundly beating the market decline of 26% (not including dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for GuiZhouYongJi PrintingLtd

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

Over the last three years, GuiZhouYongJi PrintingLtd failed to grow earnings per share, which fell 1.6% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for GuiZhouYongJi PrintingLtd at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 1.0% dividend yield is unlikely to be propping up the share price. It may well be that GuiZhouYongJi PrintingLtd revenue growth rate of 28% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for GuiZhouYongJi PrintingLtd the TSR over the last 3 years was 31%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

GuiZhouYongJi PrintingLtd shareholders are down 13% over twelve months (even including dividends), which isn't far from the market return of -14%. The silver lining is that longer term investors would have made a total return of 2% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. It's always interesting to track share price performance over the longer term. But to understand GuiZhouYongJi PrintingLtd better, we need to consider many other factors. Take risks, for example - GuiZhouYongJi PrintingLtd has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com