It's nice to see the Xuchang Yuandong Drive Shaft Co.Ltd (SZSE:002406) share price up 13% in a week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 17% in that half decade.

On a more encouraging note the company has added CN¥445m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Looking back five years, both Xuchang Yuandong Drive ShaftLtd's share price and EPS declined; the latter at a rate of 24% per year. The share price decline of 4% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 47.70 suggests that shareholders believe earnings will grow in the years ahead.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Xuchang Yuandong Drive ShaftLtd'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Xuchang Yuandong Drive ShaftLtd the TSR over the last 5 years was -7.2%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Xuchang Yuandong Drive ShaftLtd shares lost 7.2% throughout the year, that wasn't as bad as the market loss of 17%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 1.4% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Xuchang Yuandong Drive ShaftLtd is showing 4 warning signs in our investment analysis , and 1 of those is concerning...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.