Qinghai Salt Lake IndustryLtd's (SZSE:000792) investors will be pleased with their notable 99% return over the last five years

It hasn't been the best quarter for Qinghai Salt Lake Industry Co.,Ltd (SZSE:000792) shareholders, since the share price has fallen 19% in that time. Looking further back, the stock has generated good profits over five years. It has returned a market beating 99% in that time. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 66% in the last three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Qinghai Salt Lake IndustryLtd

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Qinghai Salt Lake IndustryLtd became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the Qinghai Salt Lake IndustryLtd stock price is 66% lower in the last three years. Meanwhile, EPS is up 36% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -30% per year.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Qinghai Salt Lake IndustryLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We regret to report that Qinghai Salt Lake IndustryLtd shareholders are down 22% for the year. Unfortunately, that's worse than the broader market decline of 12%. 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. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Qinghai Salt Lake IndustryLtd that you should be aware of before investing here.

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.