It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Shanghai Beite Technology Co., Ltd. (SHSE:603009) share price has flown 233% in the last three years. How nice for those who held the stock! Also pleasing for shareholders was the 46% gain in the last three months.

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.

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. 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, Shanghai Beite Technology achieved compound earnings per share growth of 11% per year. This EPS growth is lower than the 49% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 117.77.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shanghai Beite Technology the TSR over the last 3 years was 239%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Shanghai Beite Technology has rewarded shareholders with a total shareholder return of 216% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 27% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Shanghai Beite Technology better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shanghai Beite Technology (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

We will like Shanghai Beite Technology better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.