Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Jiangsu Yanghe Distillery Co., Ltd. (SZSE:002304) have had an unfortunate run in the last three years. So they might be feeling emotional about the 61% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 41% in the last year. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate three years of share price decline, Jiangsu Yanghe Distillery actually saw its earnings per share (EPS) improve by 12% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. It's good to see that Jiangsu Yanghe Distillery has increased its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Jiangsu Yanghe Distillery is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Jiangsu Yanghe Distillery in this interactive graph of future profit estimates.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. 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 Yanghe Distillery, it has a TSR of -57% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Jiangsu Yanghe Distillery shareholders are down 37% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. Keeping this in mind, a solid next step might be to take a look at Jiangsu Yanghe Distillery's dividend track record. This free interactive graph is a great place to start.

But note: Jiangsu Yanghe Distillery may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com