Qingdao Topscomm Communication's (SHSE:603421) earnings trajectory could turn positive as the stock rallies 16% this past week

Qingdao Topscomm Communication INC. (SHSE:603421) shareholders will doubtless be very grateful to see the share price up 82% in the last quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 32% in that time, significantly under-performing the market.

While the last five years has been tough for Qingdao Topscomm Communication shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for Qingdao Topscomm Communication

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Qingdao Topscomm Communication's share price and EPS declined; the latter at a rate of 21% per year. This fall in the EPS is worse than the 8% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 98.29, it's fair to say the market sees a brighter future for the business.

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 Qingdao Topscomm Communication'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Qingdao Topscomm Communication the TSR over the last 5 years was -29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Qingdao Topscomm Communication had a tough year, with a total loss of 23% (including dividends), against a market gain of about 13%. 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 5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Qingdao Topscomm Communication better, we need to consider many other factors. Take risks, for example - Qingdao Topscomm Communication has 5 warning signs (and 1 which is concerning) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.