Xiamen Jihong Technology (SZSE:002803) sheds CN¥398m, company earnings and investor returns have been trending downwards for past five years

Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Xiamen Jihong Technology Co., Ltd. (SZSE:002803), since the last five years saw the share price fall 45%. The falls have accelerated recently, with the share price down 21% in the last three months.

With the stock having lost 7.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Xiamen Jihong Technology

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the five years over which the share price declined, Xiamen Jihong Technology's earnings per share (EPS) dropped by 14% each year. This fall in the EPS is worse than the 11% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

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 Xiamen Jihong Technology'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. We note that for Xiamen Jihong Technology the TSR over the last 5 years was -41%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Xiamen Jihong Technology shareholders are down 20% for the year (even including dividends), but the market itself is up 18%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Xiamen Jihong Technology better, we need to consider many other factors. Even so, be aware that Xiamen Jihong Technology is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...

But note: Xiamen Jihong Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.