Shuangliang Eco-Energy Systems Co.,Ltd (SHSE:600481) shareholders might be concerned after seeing the share price drop 10% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 78% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 39% decline over the last twelve months.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Over half a decade, Shuangliang Eco-Energy SystemsLtd managed to grow its earnings per share at 43% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.40.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Shuangliang Eco-Energy SystemsLtd has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Shuangliang Eco-Energy SystemsLtd's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Shuangliang Eco-Energy SystemsLtd, it has a TSR of 100% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Shuangliang Eco-Energy SystemsLtd shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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 15%, 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Shuangliang Eco-Energy SystemsLtd (of which 1 makes us a bit uncomfortable!) you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.