Shareholders in Zhe Jiang Hai Liang (SZSE:002203) are in the red if they invested three years ago

While it may not be enough for some shareholders, we think it is good to see the Zhe Jiang Hai Liang Co., Ltd (SZSE:002203) share price up 14% in a single quarter. It's not great that the stock is down over the last three years. But on the bright side, its return of -13%, is better than the market, which is down 15%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Zhe Jiang Hai Liang

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. 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.

Zhe Jiang Hai Liang saw its EPS decline at a compound rate of 1.0% per year, over the last three years. This reduction in EPS is slower than the 5% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Zhe Jiang Hai Liang's earnings, revenue and cash flow.

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. In the case of Zhe Jiang Hai Liang, it has a TSR of -10% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 10% in the last year, Zhe Jiang Hai Liang shareholders lost 1.6% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Zhe Jiang Hai Liang better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Zhe Jiang Hai Liang you should be aware of, and 1 of them can't be ignored.

We will like Zhe Jiang Hai Liang 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.