No-one enjoys it when they lose money on a stock. But it's hard to avoid some disappointing investments when the overall market is down. While the State Grid Yingda Co.,Ltd. (SHSE:600517) share price is down 22% in the last three years, the total return to shareholders (which includes dividends) was -19%. That's better than the market which declined 28% over the last three years.

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.

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).

During the unfortunate three years of share price decline, State Grid YingdaLtd actually saw its earnings per share (EPS) improve by 1.1% 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.

It looks to us like the market was probably too optimistic around growth three years ago. However, taking a look at other business metrics might shed a bit more light on the share price action.

With a rather small yield of just 1.2% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 13% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating State Grid YingdaLtd further; while we may be missing something on this analysis, there might also be an opportunity.

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

If you are thinking of buying or selling State Grid YingdaLtd stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for State Grid YingdaLtd the TSR over the last 3 years was -19%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, State Grid YingdaLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.6% wasn't as bad as the market loss of around 20%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 3% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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 - State Grid YingdaLtd has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.