Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Xinyi Energy Holdings Limited (HKG:3868) share price is down 47% in the last year. That falls noticeably short of the market decline of around 26%. Longer term investors have fared much better, since the share price is up 17% in three years. The falls have accelerated recently, with the share price down 39% in the last three months. Of course, this share price action may well have been influenced by the 19% decline in the broader market, throughout the period.

With the stock having lost 8.0% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Xinyi Energy Holdings

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate twelve months during which the Xinyi Energy Holdings share price fell, it actually saw its earnings per share (EPS) improve by 9.9%. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.

Xinyi Energy Holdings' dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.

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

Xinyi Energy Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Xinyi Energy Holdings 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Xinyi Energy Holdings the TSR over the last 1 year was -44%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Xinyi Energy Holdings shareholders are down 44% for the year (even including dividends), falling short of the market return. The market shed around 26%, no doubt weighing on the stock price. Investors are up over three years, booking 10% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Take risks, for example - Xinyi Energy Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about.

We will like Xinyi Energy Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies 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 HK 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.