While Chengdu Guibao Science & Technology Co.,Ltd. (SZSE:300019) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 29% in the last quarter. But in three years the returns have been great. The share price marched upwards over that time, and is now 107% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. The thing to consider is whether the underlying business is doing well enough to support the current price.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Chengdu Guibao Science & TechnologyLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Chengdu Guibao Science & TechnologyLtd achieved compound earnings per share growth of 33% per year. The average annual share price increase of 28% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Chengdu Guibao Science & TechnologyLtd has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Chengdu Guibao Science & TechnologyLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Chengdu Guibao Science & TechnologyLtd's TSR for the last 3 years was 118%, 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

While it's certainly disappointing to see that Chengdu Guibao Science & TechnologyLtd shares lost 9.2% throughout the year, that wasn't as bad as the market loss of 16%. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Chengdu Guibao Science & TechnologyLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Chengdu Guibao Science & TechnologyLtd (of which 1 shouldn't be ignored!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CN 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.