VATS Liquor Chain Store Management Joint Stock Co., Ltd. (SZSE:300755) shareholders will doubtless be very grateful to see the share price up 71% in the last quarter. But over the last three years we've seen a quite serious decline. Regrettably, the share price slid 58% in that period. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added CN¥550m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

During the three years that the share price fell, VATS Liquor Chain Store Management's earnings per share (EPS) dropped by 35% each year. This fall in the EPS is worse than the 25% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 46.82.

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

This free interactive report on VATS Liquor Chain Store Management's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for VATS Liquor Chain Store Management the TSR over the last 3 years was -56%, 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

It's nice to see that VATS Liquor Chain Store Management shareholders have received a total shareholder return of 14% over the last year. That's including the dividend. That certainly beats the loss of about 2% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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. Case in point: We've spotted 4 warning signs for VATS Liquor Chain Store Management you should be aware of, and 1 of them is a bit concerning.

We will like VATS Liquor Chain Store Management better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.