Pulling back 5.5% this week, TRS Information Technology's SZSE:300229) five-year decline in earnings may be coming into investors focus

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of TRS Information Technology Co., Ltd. (SZSE:300229) stock is up an impressive 113% over the last five years. And in the last month, the share price has gained 12%. But this could be related to good market conditions -- stocks in its market are up 5.6% in the last month.

While the stock has fallen 5.5% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for TRS Information Technology

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...' 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.

TRS Information Technology's earnings per share are down 15% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 0.2% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 2.2% per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

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

This free interactive report on TRS Information Technology's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, TRS Information Technology's TSR for the last 5 years was 116%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that TRS Information Technology shareholders are down 43% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.7%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 17%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - TRS Information Technology has 3 warning signs we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.