While Sun.King Technology Group Limited (HKG:580) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But in three years the returns have been great. In fact, the share price is up a full 126% compared to three years ago. It's not uncommon to see a share price retrace a bit, after a big gain. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the stock has added CN¥458m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Sun.King Technology Group

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last three years, Sun.King Technology Group failed to grow earnings per share, which fell 56% (annualized).

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 11% per year). The only thing that's clear is there is low correlation between Sun.King Technology Group's share price and its historic fundamental data. Further research may be required!

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

This free interactive report on Sun.King Technology Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Sun.King Technology Group's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Sun.King Technology Group's TSR of 155% over the last 3 years is better than the share price return.

A Different Perspective

While it's certainly disappointing to see that Sun.King Technology Group shares lost 3.6% throughout the year, that wasn't as bad as the market loss of 22%. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sun.King Technology Group (of which 1 is a bit concerning!) you should know about.

Of course Sun.King Technology 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 HK 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.