The three-year underlying earnings growth at Guangdong South New MediaLtd (SZSE:300770) is promising, but the shareholders are still in the red over that time

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But in any given year a good portion of stocks will fall short of that. Unfortunately for investors in Guangdong South New Media Co.,Ltd. (SZSE:300770), the share price has slipped 31% in three years, falling short of the marketdecline of 23%. More recently, the share price has dropped a further 9.8% in a month. We do note, however, that the broader market is down 5.8% in that period, and this may have weighed on the share price.

If the past week is anything to go by, investor sentiment for Guangdong South New MediaLtd isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Guangdong South New MediaLtd

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 the unfortunate three years of share price decline, Guangdong South New MediaLtd actually saw its earnings per share (EPS) improve by 5.2% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Guangdong South New MediaLtd has actually grown its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Guangdong South New MediaLtd stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Guangdong South New MediaLtd the TSR over the last 3 years was -25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 12% in the twelve months, Guangdong South New MediaLtd shareholders did even worse, losing 18% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Guangdong South New MediaLtd .

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.