The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in ZTO Express (Cayman) Inc. (NYSE:ZTO), since the last five years saw the share price fall 36%. Even worse, it's down 8.6% in about a month, which isn't fun at all. We do note, however, that the broader market is down 5.6% in that period, and this may have weighed on the share price.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate half decade during which the share price slipped, ZTO Express (Cayman) actually saw its earnings per share (EPS) improve by 8.8% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

Revenue is actually up 14% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

ZTO Express (Cayman) is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling ZTO Express (Cayman) stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for ZTO Express (Cayman) the TSR over the last 5 years was -30%, 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

ZTO Express (Cayman) shareholders are down 3.3% for the year (even including dividends), but the market itself is up 6.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 5% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Importantly, we haven't analysed ZTO Express (Cayman)'s dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

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