The five-year decline in earnings for Wuling Motors Holdings HKG:305) isn't encouraging, but shareholders are still up 128% over that period

It's been a soft week for Wuling Motors Holdings Limited (HKG:305) shares, which are down 12%. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 95% in that time. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 72% decline over the last three years: that's a long time to wait for profits.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Wuling Motors Holdings

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 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).

Wuling Motors Holdings' earnings per share are down 7.2% 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.

The modest 1.0% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 8.0% 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.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Wuling Motors Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Wuling Motors Holdings, it has a TSR of 128% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Wuling Motors Holdings had a tough year, with a total loss of 11% (including dividends), against a market gain of about 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Wuling Motors Holdings better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Wuling Motors Holdings you should be aware of, and 2 of them are a bit concerning.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.