Guangdong Goworld (SZSE:000823) investors are up 7.6% in the past week, but earnings have declined over the last year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Guangdong Goworld Co., Ltd. (SZSE:000823) share price is up 61% in the last 1 year, clearly besting the market return of around 19% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 5.2% in three years.

Since it's been a strong week for Guangdong Goworld shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Guangdong Goworld

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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year, Guangdong Goworld actually saw its earnings per share drop 15%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We are skeptical of the suggestion that the 0.9% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Guangdong Goworld, it has a TSR of 63% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Guangdong Goworld shareholders have received a total shareholder return of 63% over the last year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Guangdong Goworld better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Guangdong Goworld (of which 1 shouldn't be ignored!) 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.