The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Shenzhen Mindray Bio-Medical Electronics Co., Ltd. (SZSE:300760) which saw its share price drive 112% higher over five years. On the other hand, we note it's down 9.4% in about a month. We note that the broader market is down 3.2% in the last month, and this may have impacted Shenzhen Mindray Bio-Medical Electronics' share price.
While the stock has fallen 3.8% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Shenzhen Mindray Bio-Medical Electronics achieved compound earnings per share (EPS) growth of 24% per year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Shenzhen Mindray Bio-Medical Electronics 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?
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. In the case of Shenzhen Mindray Bio-Medical Electronics, it has a TSR of 124% 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
While it's certainly disappointing to see that Shenzhen Mindray Bio-Medical Electronics shares lost 11% throughout the year, that wasn't as bad as the market loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 18% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Mindray Bio-Medical Electronics better, we need to consider many other factors. For instance, we've identified 1 warning sign for Shenzhen Mindray Bio-Medical Electronics that you should be aware of.
Of course Shenzhen Mindray Bio-Medical Electronics 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.