Strong week for Jiangxi Wannianqing Cement (SZSE:000789) shareholders doesn't alleviate pain of three-year loss

Jiangxi Wannianqing Cement Co., Ltd. (SZSE:000789) shareholders should be happy to see the share price up 11% in the last week. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 65% in that time. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

While the stock has risen 11% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Jiangxi Wannianqing Cement

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 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.

Over the three years that the share price declined, Jiangxi Wannianqing Cement's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

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

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Jiangxi Wannianqing Cement's TSR for the last 3 years was -60%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Jiangxi Wannianqing Cement shareholders are down 41% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. It's always interesting to track share price performance over the longer term. But to understand Jiangxi Wannianqing Cement better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Jiangxi Wannianqing Cement you should know about.

We will like Jiangxi Wannianqing Cement better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.