Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Hanyu Group Joint-Stock Co., Ltd. (SZSE:300403) shareholders have enjoyed a 59% share price rise over the last half decade, well in excess of the market return of around 34% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 14% , including dividends .
Since it's been a strong week for Hanyu Group shareholders, let's have a look at trend of the longer term fundamentals.
Check out our latest analysis for Hanyu Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Hanyu Group achieved compound earnings per share (EPS) growth of 8.2% per year. This EPS growth is reasonably close to the 10% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Hanyu Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Hanyu Group's TSR for the last 5 years was 83%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Hanyu Group shareholders have received a total shareholder return of 14% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hanyu Group , and understanding them should be part of your investment process.
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.