Guangdong Hoshion Industrial Aluminium's (SZSE:002824) underlying earnings growth outpaced the notable return generated for shareholders over the past five years

The Guangdong Hoshion Industrial Aluminium Co., Ltd. (SZSE:002824) share price has had a bad week, falling 11%. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 93% in that time. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 23% drop, in the last year.

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.

Check out our latest analysis for Guangdong Hoshion Industrial Aluminium

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Guangdong Hoshion Industrial Aluminium achieved compound earnings per share (EPS) growth of 112% per year. This EPS growth is higher than the 14% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Guangdong Hoshion Industrial Aluminium's key metrics by checking this interactive graph of Guangdong Hoshion Industrial Aluminium'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Guangdong Hoshion Industrial Aluminium's TSR for the last 5 years was 99%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Guangdong Hoshion Industrial Aluminium shareholders are down 22% for the year (even including dividends), but the market itself is up 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Guangdong Hoshion Industrial Aluminium is showing 2 warning signs in our investment analysis , you should know about...

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.