Zhuzhou CRRC Times Electric (HKG:3898) shareholders have endured a 22% loss from investing in the stock five years ago

It is doubtless a positive to see that the Zhuzhou CRRC Times Electric Co., Ltd. (HKG:3898) share price has gained some 50% in the last three months. But if you look at the last five years the returns have not been good. In fact, the share price is down 29%, which falls well short of the return you could get by buying an index fund.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Zhuzhou CRRC Times Electric

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Looking back five years, both Zhuzhou CRRC Times Electric's share price and EPS declined; the latter at a rate of 0.2% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 7% per year, over the period. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. This free interactive report on Zhuzhou CRRC Times Electric's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Zhuzhou CRRC Times Electric's TSR for the last 5 years was -22%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The total return of 11% received by Zhuzhou CRRC Times Electric shareholders over the last year isn't far from the market return of -10%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 4% per year over the last five years. Weak performance over the long term usually destroys market confidence in a stock, but bargain hunters may want to take a closer look for signs of a turnaround. Before forming an opinion on Zhuzhou CRRC Times Electric you might want to consider these 3 valuation metrics.

For those who like to find winning investments this free list of growing 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.