Changhong Huayi Compressor Co., Ltd. (SZSE:000404) shareholders have seen the share price descend 17% over the month. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 44%.

Although Changhong Huayi Compressor has shed CN¥390m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Changhong Huayi Compressor was able to grow its EPS at 49% per year over three years, sending the share price higher. This EPS growth is higher than the 13% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.79.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Changhong Huayi Compressor has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Changhong Huayi Compressor's financial health with this free report on its balance sheet.

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. In the case of Changhong Huayi Compressor, it has a TSR of 57% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The total return of 10% received by Changhong Huayi Compressor shareholders over the last year isn't far from the market return of -10%. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. 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. To that end, you should be aware of the 1 warning sign we've spotted with Changhong Huayi Compressor .

Of course Changhong Huayi Compressor may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.