Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. Zooming in on an example, the Foshan NationStar Optoelectronics Co.,Ltd (SZSE:002449) share price dropped 55% in the last half decade. That's not a lot of fun for true believers. And some of the more recent buyers are probably worried, too, with the stock falling 26% in the last year. The falls have accelerated recently, with the share price down 20% in the last three months.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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 the five years over which the share price declined, Foshan NationStar OptoelectronicsLtd's earnings per share (EPS) dropped by 30% each year. This fall in the EPS is worse than the 15% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 54.04 suggests that shareholders believe earnings will grow in the years ahead.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Foshan NationStar OptoelectronicsLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Foshan NationStar OptoelectronicsLtd's TSR for the last 5 years was -52%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Foshan NationStar OptoelectronicsLtd shareholders are down 26% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Foshan NationStar OptoelectronicsLtd has 4 warning signs (and 1 which is concerning) we think you should know about.

But note: Foshan NationStar OptoelectronicsLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.