By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Anhui Jiuhuashan Tourism Development Co., Ltd. (SHSE:603199), which is up 70%, over three years, soundly beating the market decline of 21% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 37%.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Anhui Jiuhuashan Tourism Development achieved compound earnings per share growth of 83% per year. The average annual share price increase of 19% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
We've already covered Anhui Jiuhuashan Tourism Development's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Anhui Jiuhuashan Tourism Development shareholders, and that cash payout contributed to why its TSR of 73%, over the last 3 years, is better than the share price return.
A Different Perspective
We're pleased to report that Anhui Jiuhuashan Tourism Development shareholders have received a total shareholder return of 37% over one year. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Anhui Jiuhuashan Tourism Development scores on these 3 valuation metrics.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.