While not a mind-blowing move, it is good to see that the Xiamen Kingdomway Group Company (SZSE:002626) share price has gained 14% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 52% in the last three years, falling well short of the market return.

Since Xiamen Kingdomway Group has shed CN¥378m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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.

Xiamen Kingdomway Group saw its EPS decline at a compound rate of 33% per year, over the last three years. This fall in the EPS is worse than the 22% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

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 Xiamen Kingdomway Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Xiamen Kingdomway Group will grow revenue in the future.

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. As it happens, Xiamen Kingdomway Group's TSR for the last 3 years was -49%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Xiamen Kingdomway Group shareholders are down 14% for the year (even including dividends), but the market itself is up 4.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Xiamen Kingdomway Group better, we need to consider many other factors. Even so, be aware that Xiamen Kingdomway Group is showing 1 warning sign in our investment analysis , you should know about...

Of course Xiamen Kingdomway Group 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.