It hasn't been the best quarter for Xueda (Xiamen) Education Technology Group Co., Ltd (SZSE:000526) shareholders, since the share price has fallen 20% in that time. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 164% higher than it was. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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 three years of share price growth, Xueda (Xiamen) Education Technology Group achieved compound earnings per share growth of 49% per year. The average annual share price increase of 38% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Xueda (Xiamen) Education Technology Group has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Xueda (Xiamen) Education Technology Group's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Xueda (Xiamen) Education Technology Group shareholders have received a total shareholder return of 36% over one year. That gain is better than the annual TSR over five years, which is 7%. 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. Before forming an opinion on Xueda (Xiamen) Education Technology Group you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.