Hexing Electrical Co.,Ltd. (SHSE:603556) shareholders might be concerned after seeing the share price drop 19% in the last month. In contrast, the return over three years has been impressive. In fact, the share price is up a full 209% compared to three years ago. To some, the recent share price pullback wouldn't be surprising after such a good run. Only time will tell if there is still too much optimism currently reflected in the share price.

Although Hexing ElectricalLtd has shed CN¥856m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Hexing ElectricalLtd achieved compound earnings per share growth of 60% per year. This EPS growth is higher than the 46% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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 Hexing ElectricalLtd has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Hexing ElectricalLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. We note that for Hexing ElectricalLtd the TSR over the last 3 years was 231%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Hexing ElectricalLtd shareholders have received a total shareholder return of 71% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 23%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Hexing ElectricalLtd you should be aware of.

Of course Hexing ElectricalLtd 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.