By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Foran Energy Group Co., Ltd. (SZSE:002911), which is up 40%, over three years, soundly beating the market decline of 18% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.0% , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Foran Energy Group was able to grow its EPS at 15% per year over three years, sending the share price higher. The average annual share price increase of 12% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Foran Energy Group's key metrics by checking this interactive graph of Foran Energy Group's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Foran Energy Group, it has a TSR of 58% for the last 3 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 Foran Energy Group shareholders have received a total shareholder return of 8.0% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 8% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Foran Energy Group better, we need to consider many other factors. Even so, be aware that Foran Energy Group is showing 4 warning signs in our investment analysis , you should know about...
But note: Foran Energy Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.