Zhejiang Chint Electrics Co., Ltd. (SHSE:601877) shareholders should be happy to see the share price up 21% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 59% in that time. So it is really good to see an improvement. While many would remain nervous, there could be further gains if the business can put its best foot forward.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with 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.

During the three years that the share price fell, Zhejiang Chint Electrics' earnings per share (EPS) dropped by 12% each year. This reduction in EPS is slower than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 11.55.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Zhejiang Chint Electrics' key metrics by checking this interactive graph of Zhejiang Chint Electrics's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Zhejiang Chint Electrics' TSR for the last 3 years was -57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Zhejiang Chint Electrics provided a TSR of 9.8% over the last twelve months. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 1.3% per year, over five years. It could well be that the business is stabilizing. 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 instance, we've identified 1 warning sign for Zhejiang Chint Electrics that you should be aware of.

Of course Zhejiang Chint Electrics 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.