We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Hubei Feilihua Quartz Glass Co., Ltd. (SZSE:300395) share price is up a whopping 311% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Better yet, the share price has risen 7.2% in the last week.
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 Hubei Feilihua Quartz Glass
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 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.
Over half a decade, Hubei Feilihua Quartz Glass managed to grow its earnings per share at 23% a year. This EPS growth is lower than the 33% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Hubei Feilihua Quartz Glass has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Hubei Feilihua Quartz Glass' balance sheet strength 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. We note that for Hubei Feilihua Quartz Glass the TSR over the last 5 years was 324%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 4.8% in the twelve months, Hubei Feilihua Quartz Glass shareholders did even worse, losing 30% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 33% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how Hubei Feilihua Quartz Glass scores on these 3 valuation metrics.
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.