Shanxi Xinghuacun Fen Wine Factory Co.,Ltd. (SHSE:600809) shareholders have seen the share price descend 10% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 470% in that time. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 31% in the last three years.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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.

During five years of share price growth, Shanxi Xinghuacun Fen Wine FactoryLtd achieved compound earnings per share (EPS) growth of 48% per year. This EPS growth is reasonably close to the 42% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shanxi Xinghuacun Fen Wine FactoryLtd the TSR over the last 5 years was 493%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Shanxi Xinghuacun Fen Wine FactoryLtd shareholders have received a total shareholder return of 18% over one year. And that does include the dividend. However, the TSR over five years, coming in at 43% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Shanxi Xinghuacun Fen Wine FactoryLtd has 1 warning sign we think you should be aware of.

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 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.