Chongqing Chuanyi Automation (SHSE:603100) sheds 8.0% this week, as yearly returns fall more in line with earnings growth

Chongqing Chuanyi Automation Co., Ltd. (SHSE:603100) shareholders might be concerned after seeing the share price drop 11% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 170% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 35% decline over the last twelve months.

In light of the stock dropping 8.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Chongqing Chuanyi Automation

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Chongqing Chuanyi Automation achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is lower than the 22% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

We know that Chongqing Chuanyi Automation has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Chongqing Chuanyi Automation's TSR for the last 5 years was 204%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Chongqing Chuanyi Automation shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.0%. 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. On the bright side, long term shareholders have made money, with a gain of 25% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Chongqing Chuanyi Automation better, we need to consider many other factors. For example, we've discovered 2 warning signs for Chongqing Chuanyi Automation (1 doesn't sit too well with us!) that you should be aware of before investing here.

But note: Chongqing Chuanyi Automation 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.