While not a mind-blowing move, it is good to see that the Guangdong Baolihua New Energy Stock Co., Ltd. (SZSE:000690) share price has gained 12% in the last three months. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 20% in that time, significantly under-performing the market.

Since Guangdong Baolihua New Energy Stock has shed CN¥392m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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 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).

While the share price declined over five years, Guangdong Baolihua New Energy Stock actually managed to increase EPS by an average of 21% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.

We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Guangdong Baolihua New Energy Stock has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus 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. As it happens, Guangdong Baolihua New Energy Stock's TSR for the last 5 years was -6.8%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 5.3% in the last year, Guangdong Baolihua New Energy Stock shareholders lost 1.4% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 1.3% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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. Even so, be aware that Guangdong Baolihua New Energy Stock is showing 1 warning sign in our investment analysis , you should know about...

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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.