Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. To wit, the Shenzhen Sinexcel Electric Co.,Ltd. (SZSE:300693) share price has soared 342% over five years. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 17% in about a quarter. But this could be related to the strong market, which is up 27% in the last three months.

Although Shenzhen Sinexcel ElectricLtd has shed CN¥382m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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 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.

Over half a decade, Shenzhen Sinexcel ElectricLtd managed to grow its earnings per share at 55% a year. This EPS growth is higher than the 35% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

It is of course excellent to see how Shenzhen Sinexcel ElectricLtd has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. In the case of Shenzhen Sinexcel ElectricLtd, it has a TSR of 355% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in Shenzhen Sinexcel ElectricLtd had a tough year, with a total loss of 15% (including dividends), against a market gain of about 6.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 35%, 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. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Sinexcel ElectricLtd better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Shenzhen Sinexcel ElectricLtd you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course Shenzhen Sinexcel ElectricLtd 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.