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 Guangdong Baolihua New Energy Stock Co., Ltd. (SZSE:000690) share price is down 28% in the last year. That's well below the market decline of 13%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 5.6% in three years. Even worse, it's down 8.7% in about a month, which isn't fun at all. We do note, however, that the broader market is down 6.2% in that period, and this may have weighed on the share price.

With the stock having lost 3.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Guangdong Baolihua New Energy Stock stole the show with its EPS rocketing, in the last year. We don't think the growth guide to the sustainable growth rate in this case, but we do think this sort of increase is impressive. So we are surprised the share price is down. Some different data might shed some more light on the situation.

We don't see any weakness in the Guangdong Baolihua New Energy Stock's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.

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

We know that Guangdong Baolihua New Energy Stock has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Guangdong Baolihua New Energy Stock in this interactive graph of future profit estimates.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Guangdong Baolihua New Energy Stock, it has a TSR of -24% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 13% in the twelve months, Guangdong Baolihua New Energy Stock shareholders did even worse, losing 24% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% 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. 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. For instance, we've identified 1 warning sign for Guangdong Baolihua New Energy Stock that you should be aware of.

But note: Guangdong Baolihua New Energy Stock 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