When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Henan Shenhuo Coal Industary and Electricity Power Corporation Limited (SZSE:000933) share price has soared 267% in the last half decade. Most would be very happy with that. It's also good to see the share price up 26% over the last quarter.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
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.
During the five years of share price growth, Henan Shenhuo Coal Industary and Electricity Power moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Henan Shenhuo Coal Industary and Electricity Power has grown profits over the years, but the future is more important for shareholders. This free interactive report on Henan Shenhuo Coal Industary and Electricity Power's balance sheet strength is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Henan Shenhuo Coal Industary and Electricity Power, it has a TSR of 324% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Henan Shenhuo Coal Industary and Electricity Power shareholders have received a total shareholder return of 15% over one year. That's including the dividend. However, that falls short of the 33% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Henan Shenhuo Coal Industary and Electricity Power better, we need to consider many other factors. Take risks, for example - Henan Shenhuo Coal Industary and Electricity Power has 1 warning sign we think you should be aware of.
But note: Henan Shenhuo Coal Industary and Electricity Power may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.