Pulling back 3.2% this week, Zhonghang Electronic Measuring InstrumentsLtd's SZSE:300114) five-year decline in earnings may be coming into investors focus

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Zhonghang Electronic Measuring Instruments Co.,Ltd (SZSE:300114) share price has soared 344% over five years. This just goes to show the value creation that some businesses can achieve. Unfortunately, though, the stock has dropped 3.2% over a week. However, this might be related to the overall market decline of 0.6% in a week.

Since the long term performance has been good but there's been a recent pullback of 3.2%, let's check if the fundamentals match the share price.

Check out our latest analysis for Zhonghang Electronic Measuring InstrumentsLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Zhonghang Electronic Measuring InstrumentsLtd's earnings per share are down 9.8% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, Zhonghang Electronic Measuring InstrumentsLtd's revenue is growing nicely, at a compound rate of 3.6% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Zhonghang Electronic Measuring InstrumentsLtd's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Zhonghang Electronic Measuring InstrumentsLtd's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Zhonghang Electronic Measuring InstrumentsLtd's TSR of 349% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market lost about 8.9% in the twelve months, Zhonghang Electronic Measuring InstrumentsLtd shareholders did even worse, losing 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 35%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Zhonghang Electronic Measuring InstrumentsLtd that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.