Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Changzhou Xingyu Automotive Lighting Systems Co.,Ltd. (SHSE:601799) shareholders, since the share price is down 34% in the last three years, falling well short of the market decline of around 18%. The falls have accelerated recently, with the share price down 12% in the last three months.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the unfortunate three years of share price decline, Changzhou Xingyu Automotive Lighting SystemsLtd actually saw its earnings per share (EPS) improve by 2.0% 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.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. But it's possible a look at other metrics will be enlightening.

The modest 0.3% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 15% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Changzhou Xingyu Automotive Lighting SystemsLtd more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Changzhou Xingyu Automotive Lighting SystemsLtd is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Changzhou Xingyu Automotive Lighting SystemsLtd will earn in the future (free analyst consensus estimates)

A Different Perspective

Changzhou Xingyu Automotive Lighting SystemsLtd provided a TSR of 7.2% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. This suggests the company might be improving over time. Before forming an opinion on Changzhou Xingyu Automotive Lighting SystemsLtd you might want to consider these 3 valuation metrics.

But note: Changzhou Xingyu Automotive Lighting SystemsLtd 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.