We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Shenyang Xingqi Pharmaceutical Co.,Ltd. (SZSE:300573) shares for the last five years, while they gained 725%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 33% gain in the last three months. It really delights us to see such great share price performance for investors.

In light of the stock dropping 3.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Shenyang Xingqi PharmaceuticalLtd achieved compound earnings per share (EPS) growth of 73% per year. The EPS growth is more impressive than the yearly share price gain of 53% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 140.64, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Shenyang Xingqi PharmaceuticalLtd has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Shenyang Xingqi PharmaceuticalLtd's TSR for the last 5 years was 749%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Shenyang Xingqi PharmaceuticalLtd has rewarded shareholders with a total shareholder return of 124% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 53%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Shenyang Xingqi PharmaceuticalLtd you should know about.

Of course Shenyang Xingqi PharmaceuticalLtd 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.