Guangdong Ellington Electronics TechnologyLtd's (SHSE:603328) earnings trajectory could turn positive as the stock ascends 6.1% this past week

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Guangdong Ellington Electronics Technology Co.,Ltd (SHSE:603328) shareholders for doubting their decision to hold, with the stock down 28% over a half decade. But it's up 6.1% in the last week.

While the stock has risen 6.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Guangdong Ellington Electronics TechnologyLtd

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 Guangdong Ellington Electronics TechnologyLtd's share price and EPS declined; the latter at a rate of 11% per year. This fall in the EPS is worse than the 6% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Guangdong Ellington Electronics TechnologyLtd'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Guangdong Ellington Electronics TechnologyLtd's TSR for the last 5 years was -11%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Guangdong Ellington Electronics TechnologyLtd shares lost 7.6% throughout the year, that wasn't as bad as the market loss of 13%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 2% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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 - Guangdong Ellington Electronics TechnologyLtd has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.