Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Wuxi Taiji Industry Limited Corporation (SHSE:600667) shareholders have had that experience, with the share price dropping 43% in three years, versus a market decline of about 29%. Furthermore, it's down 15% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 12% in the same period.

If the past week is anything to go by, investor sentiment for Wuxi Taiji Industry Limited isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Wuxi Taiji Industry Limited moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

The modest 2.0% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 25% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Wuxi Taiji Industry Limited further; while we may be missing something on this analysis, there might also be an opportunity.

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 Wuxi Taiji Industry Limited has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Wuxi Taiji Industry Limited

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Wuxi Taiji Industry Limited, it has a TSR of -40% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Wuxi Taiji Industry Limited shareholders are down 20% over twelve months (even including dividends), which isn't far from the market return of -18%. Unfortunately, last year's performance is a deterioration of an already poor long term track record, given the loss of 3% per year over the last five years. It will probably take a substantial improvement in the fundamental performance for the company to reverse this trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Wuxi Taiji Industry Limited , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.