Shenzhen Jinjia Group Co.,Ltd. (SZSE:002191) shareholders should be happy to see the share price up 11% in the last month. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 65% in that time. So it is really good to see an improvement. Perhaps the company has turned over a new leaf.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Shenzhen Jinjia GroupLtd moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. On the other hand, the uninspired reduction in revenue, at 11% each year, may have shareholders ditching the stock. This could have some investors worried about the longer term growth potential (or lack thereof).

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

We know that Shenzhen Jinjia GroupLtd has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Shenzhen Jinjia GroupLtd

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Shenzhen Jinjia GroupLtd the TSR over the last 3 years was -58%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 10% in the twelve months, Shenzhen Jinjia GroupLtd shareholders did even worse, losing 34% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Shenzhen Jinjia GroupLtd (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.