Jiangsu Yawei Machine Tool Co., Ltd. (SZSE:002559) shareholders might understandably be very concerned that the share price has dropped 30% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 42% in that time.

Although Jiangsu Yawei Machine Tool has shed CN¥385m 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 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).

Jiangsu Yawei Machine Tool's earnings per share are down 4.5% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 1.3% dividend yield is attracting many buyers to the stock. On the other hand, Jiangsu Yawei Machine Tool's revenue is growing nicely, at a compound rate of 6.0% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Jiangsu Yawei Machine Tool has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Jiangsu Yawei Machine Tool will earn in the future (free profit forecasts).

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Jiangsu Yawei Machine Tool, it has a TSR of 54% 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

It's good to see that Jiangsu Yawei Machine Tool has rewarded shareholders with a total shareholder return of 2.5% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 9% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Take risks, for example - Jiangsu Yawei Machine Tool has 2 warning signs we think you should be aware of.

We will like Jiangsu Yawei Machine Tool better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.