As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) shareholders, since the share price is down 49% in the last three years, falling well short of the market decline of around 27%. On the other hand the share price has bounced 7.8% over the last week.

On a more encouraging note the company has added CN¥805m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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.

During the three years that the share price fell, Tangshan Sanyou Chemical IndustriesLtd's earnings per share (EPS) dropped by 21% each year. This change in EPS is reasonably close to the 20% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Tangshan Sanyou Chemical IndustriesLtd has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tangshan Sanyou Chemical IndustriesLtd's TSR for the last 3 years was -45%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Although it hurts that Tangshan Sanyou Chemical IndustriesLtd returned a loss of 1.1% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.9% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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 example, we've discovered 1 warning sign for Tangshan Sanyou Chemical IndustriesLtd that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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