It is a pleasure to report that the Zhejiang Fuchunjiang Environmental Thermoelectric Co.,LTD. (SZSE:002479) is up 38% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 38% in that half decade.

While the last five years has been tough for Zhejiang Fuchunjiang Environmental ThermoelectricLTD shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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.

While the share price declined over five years, Zhejiang Fuchunjiang Environmental ThermoelectricLTD actually managed to increase EPS by an average of 22% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

In contrast to the share price, revenue has actually increased by 2.2% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Zhejiang Fuchunjiang Environmental ThermoelectricLTD'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. 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. As it happens, Zhejiang Fuchunjiang Environmental ThermoelectricLTD's TSR for the last 5 years was -27%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Zhejiang Fuchunjiang Environmental ThermoelectricLTD has rewarded shareholders with a total shareholder return of 13% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 4 warning signs for Zhejiang Fuchunjiang Environmental ThermoelectricLTD (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.