Positive earnings growth hasn't been enough to get Shandong Weigao Group Medical Polymer (HKG:1066) shareholders a favorable return over the last five years

Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. Zooming in on an example, the Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) share price dropped 63% in the last half decade. That is extremely sub-optimal, to say the least.

While the last five years has been tough for Shandong Weigao Group Medical Polymer shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

While the share price declined over five years, Shandong Weigao Group Medical Polymer actually managed to increase EPS by an average of 0.3% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Looking to other metrics might better explain the share price change.

The steady dividend doesn't really explain why the share price is down. It's not immediately clear to us why the stock price is down but further research might provide some answers.

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

This free interactive report on Shandong Weigao Group Medical Polymer's balance sheet strength 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. 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. We note that for Shandong Weigao Group Medical Polymer the TSR over the last 5 years was -57%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Shandong Weigao Group Medical Polymer shareholders gained a total return of 29% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Shandong Weigao Group Medical Polymer better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Shandong Weigao Group Medical Polymer you should be aware of.

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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.