The five-year decline in earnings for Zhonghang Electronic Measuring InstrumentsLtd SZSE:300114) isn't encouraging, but shareholders are still up 273% over that period

Zhonghang Electronic Measuring Instruments Co.,Ltd (SZSE:300114) shareholders might be concerned after seeing the share price drop 11% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 268% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

In light of the stock dropping 3.2% 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 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Zhonghang Electronic Measuring InstrumentsLtd actually saw its EPS drop 9.8% per year.

This means it's unlikely the market is judging the company based on earnings growth. 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.

In contrast revenue growth of 3.6% per year is probably viewed as evidence that Zhonghang Electronic Measuring InstrumentsLtd is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Zhonghang Electronic Measuring InstrumentsLtd's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered Zhonghang Electronic Measuring InstrumentsLtd's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Zhonghang Electronic Measuring InstrumentsLtd shareholders, and that cash payout contributed to why its TSR of 273%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Zhonghang Electronic Measuring InstrumentsLtd has rewarded shareholders with a total shareholder return of 1.0% in the last twelve months. However, the TSR over five years, coming in at 30% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Even so, be aware that Zhonghang Electronic Measuring InstrumentsLtd is showing 1 warning sign in our investment analysis , you should know about...

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.