Nanjing Public Utilities Development Co., Ltd. (SZSE:000421) shareholders might be concerned after seeing the share price drop 21% in the last month. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 11%, less than the market return of 23%.

In light of the stock dropping 18% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Nanjing Public Utilities Development actually saw its EPS drop 9.7% per year.

Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.

We doubt the modest 1.9% dividend yield is attracting many buyers to the stock. On the other hand, Nanjing Public Utilities Development's revenue is growing nicely, at a compound rate of 11% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Nanjing Public Utilities Development the TSR over the last 5 years was 21%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Nanjing Public Utilities Development shareholders have received a total shareholder return of 1.3% over the last year. That's including the dividend. However, that falls short of the 4% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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 Nanjing Public Utilities Development (2 don't sit too well with us!) that you should be aware of before investing here.

For those who like to find winning investments this free list of growing 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.