Fujian Expressway DevelopmentLtd (SHSE:600033) investors are up 3.9% in the past week, but earnings have declined over the last three years

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Fujian Expressway Development Co.,Ltd (SHSE:600033) share price is up 38% in the last three years, clearly besting the market decline of around 23% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year, including dividends.

Since the stock has added CN¥412m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Fujian Expressway DevelopmentLtd

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.

During the three years of share price growth, Fujian Expressway DevelopmentLtd actually saw its earnings per share (EPS) drop 0.6% per year.

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. So other metrics may hold the key to understanding what is influencing investors.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 4.8% per year). What's clear is that historic earnings and revenue aren't matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Take a more thorough look at Fujian Expressway DevelopmentLtd's financial health with this free report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fujian Expressway DevelopmentLtd's TSR for the last 3 years was 59%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Fujian Expressway DevelopmentLtd shareholders have received a total shareholder return of 29% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% 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 Fujian Expressway DevelopmentLtd better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Fujian Expressway DevelopmentLtd you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.