Satellite Chemical Co.,Ltd. (SZSE:002648) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 199% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.

Although Satellite ChemicalLtd has shed CN¥2.6b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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 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, Satellite ChemicalLtd achieved compound earnings per share (EPS) growth of 30% per year. This EPS growth is higher than the 24% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 10.19 also suggests market apprehension.

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

We know that Satellite ChemicalLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Satellite ChemicalLtd will grow revenue in the future.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Satellite ChemicalLtd the TSR over the last 5 years was 219%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Satellite ChemicalLtd shares lost 0.9% throughout the year, that wasn't as bad as the market loss of 19%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 26% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Satellite ChemicalLtd better, we need to consider many other factors. For instance, we've identified 1 warning sign for Satellite ChemicalLtd that you should be aware of.

But note: Satellite ChemicalLtd 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.