Optimism for Beijing Jiaxun Feihong Electrical (SZSE:300213) has grown this past week, despite five-year decline in earnings

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Beijing Jiaxun Feihong Electrical Co., Ltd. (SZSE:300213) shareholders have enjoyed a 40% share price rise over the last half decade, well in excess of the market return of around 20% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 16%, including dividends.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Beijing Jiaxun Feihong Electrical

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Beijing Jiaxun Feihong Electrical's earnings per share are down 14% 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.

We doubt the modest 0.6% dividend yield is attracting many buyers to the stock. It is not great to see that revenue has dropped by 1.3% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Beijing Jiaxun Feihong Electrical's TSR for the last 5 years was 45%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Beijing Jiaxun Feihong Electrical has rewarded shareholders with a total shareholder return of 16% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Beijing Jiaxun Feihong Electrical better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Beijing Jiaxun Feihong Electrical you should be aware of, and 1 of them is potentially serious.

But note: Beijing Jiaxun Feihong Electrical 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.