It might be of some concern to shareholders to see the Ningxia Building Materials Group Co.,Ltd (SHSE:600449) share price down 14% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 146% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although Ningxia Building Materials GroupLtd has shed CN¥392m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Ningxia Building Materials GroupLtd

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).

During five years of share price growth, Ningxia Building Materials GroupLtd actually saw its EPS drop 11% per year.

This means it's unlikely the market is judging the company based on earnings growth. 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.

In contrast revenue growth of 18% per year is probably viewed as evidence that Ningxia Building Materials GroupLtd is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Ningxia Building Materials GroupLtd's TSR for the last 5 years was 199%, 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 Ningxia Building Materials GroupLtd shareholders have received a total shareholder return of 51% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% 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. 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. For example, we've discovered 3 warning signs for Ningxia Building Materials GroupLtd that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies 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.