It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. To wit, the Zhejiang Sanhua Intelligent Controls Co.,Ltd (SZSE:002050) share price has flown 287% in the last three years. Most would be happy with that. It's also good to see the share price up 79% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Zhejiang Sanhua Intelligent ControlsLtd

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.

Zhejiang Sanhua Intelligent ControlsLtd was able to grow its EPS at 13% per year over three years, sending the share price higher. This EPS growth is lower than the 57% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This optimism is also reflected in the fairly generous P/E ratio of 59.50.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Zhejiang Sanhua Intelligent ControlsLtd has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Zhejiang Sanhua Intelligent ControlsLtd, it has a TSR of 300% 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

It's nice to see that Zhejiang Sanhua Intelligent ControlsLtd shareholders have received a total shareholder return of 24% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 28% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Sanhua Intelligent ControlsLtd better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Zhejiang Sanhua Intelligent ControlsLtd you should be aware of, and 1 of them is potentially serious.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.