While Guangdong Hongtu Technology (holdings) Co.,Ltd. (SZSE:002101) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 111% in that time. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 4.4% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Guangdong Hongtu Technology (holdings)Ltd

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 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).

During three years of share price growth, Guangdong Hongtu Technology (holdings)Ltd moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

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

We know that Guangdong Hongtu Technology (holdings)Ltd has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Guangdong Hongtu Technology (holdings)Ltd's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Guangdong Hongtu Technology (holdings)Ltd shareholders, and that cash payout contributed to why its TSR of 117%, over the last 3 years, is better than the share price return.

A Different Perspective

While the broader market lost about 8.8% in the twelve months, Guangdong Hongtu Technology (holdings)Ltd shareholders did even worse, losing 35%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Guangdong Hongtu Technology (holdings)Ltd has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.