It hasn't been the best quarter for Wondershare Technology Group Co., Ltd. (SZSE:300624) shareholders, since the share price has fallen 22% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. We think most investors would be happy with the 147% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 45% drop, in the last year.

In light of the stock dropping 5.7% 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.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, Wondershare Technology Group actually saw its EPS drop 0.2% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 0.1% dividend yield is attracting many buyers to the stock. On the other hand, Wondershare Technology Group's revenue is growing nicely, at a compound rate of 17% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Wondershare Technology Group has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Wondershare Technology Group the TSR over the last 5 years was 150%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 10% in the twelve months, Wondershare Technology Group shareholders did even worse, losing 45% (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. Longer term investors wouldn't be so upset, since they would have made 20%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You could get a better understanding of Wondershare Technology Group's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.