For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Li Ning Company Limited (HKG:2331) shares for the last five years, while they gained 926%. This just goes to show the value creation that some businesses can achieve. But it's down 5.2% in the last week. However, this might be related to the overall market decline of 2.7% in a week. We love happy stories like this one. The company should be really proud of that performance!

Although Li Ning has shed CN¥9.4b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Li Ning

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. 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 five years of share price growth, Li Ning achieved compound earnings per share (EPS) growth of 58% per year. That makes the EPS growth particularly close to the yearly share price growth of 59%. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

We know that Li Ning has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Li Ning'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Li Ning the TSR over the last 5 years was 953%, 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

While the broader market lost about 23% in the twelve months, Li Ning shareholders did even worse, losing 36% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 60%, 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. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Li Ning you should know about.

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 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.