The three-year decline in earnings for China Rare Earth Resources And Technology SZSE:000831) isn't encouraging, but shareholders are still up 48% over that period

China Rare Earth Resources And Technology Co., Ltd. (SZSE:000831) shareholders might be concerned after seeing the share price drop 16% in the last month. But over three years, the returns would have left most investors smiling In fact, the company's share price bested the return of its market index in that time, posting a gain of 47%.

While the stock has fallen 7.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for China Rare Earth Resources And Technology

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 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 three years of share price growth, China Rare Earth Resources And Technology actually saw its earnings per share (EPS) drop 63% per year.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.

Languishing at just 0.3%, we doubt the dividend is doing much to prop up the share price. It may well be that China Rare Earth Resources And Technology revenue growth rate of 15% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. So it makes a lot of sense to check out what analysts think China Rare Earth Resources And Technology will earn in the future (free profit forecasts).

A Different Perspective

While the broader market lost about 12% in the twelve months, China Rare Earth Resources And Technology shareholders did even worse, losing 15% (even including dividends). 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 7%, 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. It's always interesting to track share price performance over the longer term. But to understand China Rare Earth Resources And Technology better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for China Rare Earth Resources And Technology you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.