The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Guilin Sanjin Pharmaceutical Co., Ltd. (SZSE:002275) has fallen short of that second goal, with a share price rise of 17% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Unfortunately the share price is down 0.6% in the last year.

The past week has proven to be lucrative for Guilin Sanjin Pharmaceutical investors, so let's see if fundamentals drove the company's five-year performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Guilin Sanjin Pharmaceutical managed to grow its earnings per share at 1.4% a year. This EPS growth is lower than the 3% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

It might be well worthwhile taking a look at our free report on Guilin Sanjin Pharmaceutical's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Guilin Sanjin Pharmaceutical, it has a TSR of 45% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Guilin Sanjin Pharmaceutical provided a TSR of 3.3% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 8% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Guilin Sanjin Pharmaceutical better, we need to consider many other factors. For instance, we've identified 2 warning signs for Guilin Sanjin Pharmaceutical that you should be aware of.

We will like Guilin Sanjin Pharmaceutical 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.