Changchun UP Optotech Co.,Ltd. (SZSE:002338) shareholders might understandably be very concerned that the share price has dropped 32% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 85% has certainly bested the market return!
Since the stock has added CN¥394m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
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, Changchun UP OptotechLtd managed to grow its earnings per share at 22% a year. This EPS growth is higher than the 13% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Of course, with a P/E ratio of 63.17, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Changchun UP OptotechLtd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Changchun UP OptotechLtd, it has a TSR of 87% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's never nice to take a loss, Changchun UP OptotechLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.7% wasn't as bad as the market loss of around 21%. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Is Changchun UP OptotechLtd cheap compared to other companies? These 3 valuation measures might help you decide.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.