PAX Global Technology Limited (HKG:327) shareholders might be concerned after seeing the share price drop 11% in the last month. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. To wit, the share price did better than an index fund, climbing 96% during that period.

Since the long term performance has been good but there's been a recent pullback of 5.8%, let's check if the fundamentals match the share price.

View our latest analysis for PAX Global Technology

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 three years of share price growth, PAX Global Technology achieved compound earnings per share growth of 30% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 25% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that PAX Global Technology has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of PAX Global Technology, it has a TSR of 120% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 19% in the twelve months, PAX Global Technology shareholders did even worse, losing 26% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with PAX Global Technology (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course PAX Global Technology 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.