Taiji Computer Corporation Limited (SZSE:002368) shareholders might be concerned after seeing the share price drop 29% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 79% in that time.
The past week has proven to be lucrative for Taiji Computer investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for Taiji Computer
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Taiji Computer managed to grow its earnings per share at 4.5% a year. This EPS growth is lower than the 12% 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 five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 49.91.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Taiji Computer'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). 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. As it happens, Taiji Computer's TSR for the last 5 years was 86%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While it's certainly disappointing to see that Taiji Computer shares lost 2.1% throughout the year, that wasn't as bad as the market loss of 4.5%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 13% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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 3 warning signs with Taiji Computer , and understanding them should be part of your investment process.
Of course Taiji Computer may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.