China Transinfo Technology Co., Ltd (SZSE:002373) shareholders should be happy to see the share price up 24% in the last month. But if you look at the last five years the returns have not been good. In fact, the share price is down 47%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added CN¥1.3b 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.

During five years of share price growth, China Transinfo Technology moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

The modest 0.5% dividend yield is unlikely to be guiding the market view of the stock. Arguably, the revenue drop of 3.3% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that China Transinfo Technology has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on China Transinfo Technology

A Different Perspective

Investors in China Transinfo Technology had a tough year, with a total loss of 21% (including dividends), against a market gain of about 3.3%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. 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. Is China Transinfo Technology cheap compared to other companies? These 3 valuation measures might help you decide.

Of course China Transinfo Technology 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.