Some China Wafer Level CSP Co., Ltd. (SHSE:603005) shareholders are probably rather concerned to see the share price fall 39% over the last three months. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 171% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 56% decline over the last three years: that's a long time to wait for profits.

In light of the stock dropping 18% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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 five years of share price growth, China Wafer Level CSP achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is lower than the 22% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 83.18.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into China Wafer Level CSP's key metrics by checking this interactive graph of China Wafer Level CSP's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Wafer Level CSP's TSR for the last 5 years was 177%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that China Wafer Level CSP shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 26%. 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 23%, 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. It's always interesting to track share price performance over the longer term. But to understand China Wafer Level CSP better, we need to consider many other factors. For example, we've discovered 2 warning signs for China Wafer Level CSP that you should be aware of before investing here.

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 Chinese 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.