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Jiangsu Huahong Technology (SZSE:002645) stock performs better than its underlying earnings growth over last five years

Simply Wall St ·  07/24 09:45

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Jiangsu Huahong Technology Co., Ltd. (SZSE:002645) share price has soared 179% in the last half decade. Most would be very happy with that. It's also good to see the share price up 22% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days).

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.

View our latest analysis for Jiangsu Huahong Technology

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Jiangsu Huahong Technology achieved compound earnings per share (EPS) growth of 54% per year. This EPS growth is higher than the 23% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

earnings-per-share-growthSZSE:002645 Earnings Per Share Growth July 24th 2022

It is of course excellent to see how Jiangsu Huahong Technology has grown profits over the years, but the future is more important for shareholders. This free interactive report on Jiangsu Huahong Technology'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 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 Jiangsu Huahong Technology the TSR over the last 5 years was 189%, 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

It's good to see that Jiangsu Huahong Technology has rewarded shareholders with a total shareholder return of 8.2% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 24% per year, is even more impressive. 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 Jiangsu Huahong Technology better, we need to consider many other factors. For example, we've discovered 2 warning signs for Jiangsu Huahong Technology (1 doesn't sit too well with us!) that you should be aware of before investing here.

But note: Jiangsu Huahong Technology 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 CN 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.

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