While Baowu Magnesium Technology Co., Ltd. (SZSE:002182) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 90% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 27% decline over the last twelve months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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 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 five years of share price growth, Baowu Magnesium Technology actually saw its EPS drop 2.0% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

The modest 0.8% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 11% per year is probably viewed as evidence that Baowu Magnesium Technology is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Baowu Magnesium Technology's TSR for the last 5 years was 98%, 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

We regret to report that Baowu Magnesium Technology shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Baowu Magnesium Technology better, we need to consider many other factors. Even so, be aware that Baowu Magnesium Technology is showing 4 warning signs in our investment analysis , and 2 of those are a bit concerning...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com