Rainbow Digital Commercial (SZSE:002419) stock falls 5.2% in past week as five-year earnings and shareholder returns continue downward trend

While it may not be enough for some shareholders, we think it is good to see the Rainbow Digital Commercial Co., Ltd. (SZSE:002419) share price up 18% in a single quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 45%, which falls well short of the return you could get by buying an index fund.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Rainbow Digital Commercial

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.

Looking back five years, both Rainbow Digital Commercial's share price and EPS declined; the latter at a rate of 33% per year. This fall in the EPS is worse than the 11% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 56.90 suggests that shareholders believe earnings will grow in the years ahead.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Rainbow Digital Commercial the TSR over the last 5 years was -37%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Rainbow Digital Commercial shareholders have received a total shareholder return of 10% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Rainbow Digital Commercial better, we need to consider many other factors. For example, we've discovered 3 warning signs for Rainbow Digital Commercial that you should be aware of before investing here.

But note: Rainbow Digital Commercial 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.