Guangzhou Tinci Materials Technology Co., Ltd. (SZSE:002709) shareholders might understandably be very concerned that the share price has dropped 34% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 664%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 45% decline over the last twelve months. We love happy stories like this one. The company should be really proud of that performance!

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Guangzhou Tinci Materials Technology

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Guangzhou Tinci Materials Technology achieved compound earnings per share (EPS) growth of 47% per year. This EPS growth is reasonably close to the 50% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

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 Guangzhou Tinci Materials Technology has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Guangzhou Tinci Materials Technology's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Guangzhou Tinci Materials Technology, it has a TSR of 685% 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

Guangzhou Tinci Materials Technology shareholders are down 44% for the year (even including dividends), but the market itself is up 1.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 51%, 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 Guangzhou Tinci Materials Technology better, we need to consider many other factors. Even so, be aware that Guangzhou Tinci Materials Technology is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.