While it may not be enough for some shareholders, we think it is good to see the Yangtze Optical Fibre And Cable Joint Stock Limited Company (HKG:6869) share price up 22% in a single quarter. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 48% in that half decade.

While the last five years has been tough for Yangtze Optical Fibre And Cable Limited 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. 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 the five years over which the share price declined, Yangtze Optical Fibre And Cable Limited's earnings per share (EPS) dropped by 3.9% each year. This reduction in EPS is less than the 12% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 5.09 further reflects this reticence.

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

It is of course excellent to see how Yangtze Optical Fibre And Cable Limited has grown profits over the years, but the future is more important for shareholders. This free interactive report on Yangtze Optical Fibre And Cable Limited'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). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Yangtze Optical Fibre And Cable Limited the TSR over the last 5 years was -41%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Yangtze Optical Fibre And Cable Limited shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 2 warning signs for Yangtze Optical Fibre And Cable Limited (1 is concerning!) that you should be aware of before investing here.

We will like Yangtze Optical Fibre And Cable Limited better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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