Investors are understandably disappointed when a stock they own declines in value. But when the market is down, you're bound to have some losers. The Changchun FAWAY Automobile Components Co.,Ltd (SHSE:600742) is down 19% over three years, but the total shareholder return is -11% once you include the dividend. And that total return actually beats the market decline of 26%. On the other hand the share price has bounced 6.8% over the last week.

While the stock has risen 6.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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 the three years that the share price fell, Changchun FAWAY Automobile ComponentsLtd's earnings per share (EPS) dropped by 17% each year. In comparison the 7% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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

Dive deeper into Changchun FAWAY Automobile ComponentsLtd's key metrics by checking this interactive graph of Changchun FAWAY Automobile ComponentsLtd's earnings, revenue and cash flow.

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, Changchun FAWAY Automobile ComponentsLtd's TSR for the last 3 years was -11%, 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

While it's certainly disappointing to see that Changchun FAWAY Automobile ComponentsLtd shares lost 6.0% throughout the year, that wasn't as bad as the market 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 1.8% 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. Case in point: We've spotted 1 warning sign for Changchun FAWAY Automobile ComponentsLtd you should be aware of.

But note: Changchun FAWAY Automobile ComponentsLtd 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