It's been a soft week for Shanghai Emperor of Cleaning Hi-Tech Co., Ltd (SHSE:603200) shares, which are down 11%. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 47% in that time.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Check out our latest analysis for Shanghai Emperor of Cleaning Hi-Tech
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.
During five years of share price growth, Shanghai Emperor of Cleaning Hi-Tech actually saw its EPS drop 18% per year.
This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
The modest 0.4% dividend yield is unlikely to be propping up the share price. On the other hand, Shanghai Emperor of Cleaning Hi-Tech's revenue is growing nicely, at a compound rate of 4.8% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Shanghai Emperor of Cleaning Hi-Tech's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Shanghai Emperor of Cleaning Hi-Tech, it has a TSR of 50% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Shanghai Emperor of Cleaning Hi-Tech shareholders have received a total shareholder return of 7.2% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 8% a year, is even better. 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. For example, we've discovered 1 warning sign for Shanghai Emperor of Cleaning Hi-Tech that you should be aware of before investing here.
Of course Shanghai Emperor of Cleaning Hi-Tech 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.