The five-year decline in earnings for CNNC Hua Yuan Titanium Dioxide SZSE:002145) isn't encouraging, but shareholders are still up 51% over that period

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the CNNC Hua Yuan Titanium Dioxide Co., Ltd (SZSE:002145) share price is up 46% in the last 5 years, clearly besting the market return of around 6.1% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 4.8%, including dividends.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for CNNC Hua Yuan Titanium Dioxide

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, CNNC Hua Yuan Titanium Dioxide actually saw its EPS drop 4.4% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

The modest 1.2% dividend yield is unlikely to be propping up the share price. On the other hand, CNNC Hua Yuan Titanium Dioxide's revenue is growing nicely, at a compound rate of 11% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for CNNC Hua Yuan Titanium Dioxide the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

CNNC Hua Yuan Titanium Dioxide shareholders gained a total return of 4.8% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 9% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with CNNC Hua Yuan Titanium Dioxide (at least 1 which is concerning) , and understanding them should be part of your investment process.

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.