Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Zhejiang Cfmoto Power Co.,Ltd (SHSE:603129) share price. It's 602% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. But it's down 5.0% in the last week. But note that the broader market is down 2.8% since last week, and this may have impacted Zhejiang Cfmoto PowerLtd's share price. Anyone who held for that rewarding ride would probably be keen to talk about it.

While the stock has fallen 5.0% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Zhejiang Cfmoto PowerLtd achieved compound earnings per share (EPS) growth of 50% per year. This EPS growth is remarkably close to the 48% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Zhejiang Cfmoto PowerLtd has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Zhejiang Cfmoto PowerLtd stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Zhejiang Cfmoto PowerLtd the TSR over the last 5 years was 634%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's never nice to take a loss, Zhejiang Cfmoto PowerLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 6.4% wasn't as bad as the market loss of around 19%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 49% 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. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Cfmoto PowerLtd better, we need to consider many other factors. For instance, we've identified 2 warning signs for Zhejiang Cfmoto PowerLtd (1 is a bit unpleasant) that you should be aware of.

Of course Zhejiang Cfmoto PowerLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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