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MECOM Power and Construction's (HKG:1183) three-year earnings growth trails the incredible shareholder returns

Simply Wall St ·  {{timeTz}}

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One such superstar is MECOM Power and Construction Limited (HKG:1183), which saw its share price soar 376% in three years. Also pleasing for shareholders was the 13% gain in the last three months.

Since it's been a strong week for MECOM Power and Construction shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for MECOM Power and Construction

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace ...' 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 three years of share price growth, MECOM Power and Construction achieved compound earnings per share growth of 31% per year. This EPS growth is lower than the 68% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This optimism is also reflected in the fairly generous P/E ratio of 56.61.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

SEHK:1183 Earnings Per Share Growth June 16th 2022

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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, MECOM Power and Construction's TSR for the last 3 years was 408%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that MECOM Power and Construction shareholders have gained 5.6% (in total) over the last year. And yes, that does include the dividend. But the three year TSR of 72% per year is even better. If you would like to research MECOM Power and Construction in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal.


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