The three-year shareholder returns and company earnings persist lower as JiaoZuo WanFang Aluminum Manufacturing (SZSE:000612) stock falls a further 6.1% in past week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term JiaoZuo WanFang Aluminum Manufacturing Co., Ltd (SZSE:000612) shareholders have had that experience, with the share price dropping 52% in three years, versus a market decline of about 32%. Shareholders have had an even rougher run lately, with the share price down 30% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for JiaoZuo WanFang Aluminum Manufacturing

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

JiaoZuo WanFang Aluminum Manufacturing saw its EPS decline at a compound rate of 3.8% per year, over the last three years. This reduction in EPS is slower than the 22% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 7.42.

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

This free interactive report on JiaoZuo WanFang Aluminum Manufacturing's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, JiaoZuo WanFang Aluminum Manufacturing's TSR for the last 3 years was -50%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that JiaoZuo WanFang Aluminum Manufacturing has rewarded shareholders with a total shareholder return of 0.7% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 2% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should be aware of the 1 warning sign we've spotted with JiaoZuo WanFang Aluminum Manufacturing .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.