Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Anhui Gujing Distillery Co., Ltd. (SZSE:000596) share price is up a whopping 390% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's even up 7.0% in the last week. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Since the stock has added CN¥9.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Anhui Gujing Distillery
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Anhui Gujing Distillery achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is slower than the share price growth of 37% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Anhui Gujing Distillery's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Anhui Gujing Distillery, it has a TSR of 416% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Anhui Gujing Distillery has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 39% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Anhui Gujing Distillery better, we need to consider many other factors. Take risks, for example - Anhui Gujing Distillery has 2 warning signs (and 1 which is significant) we think you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
