NanJi E-Commerce (SZSE:002127) earnings and shareholder returns have been trending downwards for the last five years, but the stock lifts 7.8% this past week

It is doubtless a positive to see that the NanJi E-Commerce Co., LTD (SZSE:002127) share price has gained some 98% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 55% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.

On a more encouraging note the company has added CN¥872m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for NanJi E-Commerce

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...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, NanJi E-Commerce moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

The modest 1.6% dividend yield is unlikely to be guiding the market view of the stock. Arguably, the revenue drop of 8.2% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, NanJi E-Commerce's TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that NanJi E-Commerce has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for NanJi E-Commerce (of which 2 are significant!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.