When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Changzhou Xingyu Automotive Lighting Systems Co.,Ltd. (SHSE:601799) stock is up an impressive 206% over the last five years. We note the stock price is up 2.8% in the last seven days.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Changzhou Xingyu Automotive Lighting SystemsLtd
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Changzhou Xingyu Automotive Lighting SystemsLtd achieved compound earnings per share (EPS) growth of 9.8% per year. This EPS growth is lower than the 25% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. Dive deeper into the earnings by checking this interactive graph of Changzhou Xingyu Automotive Lighting SystemsLtd's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Changzhou Xingyu Automotive Lighting SystemsLtd, it has a TSR of 220% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Changzhou Xingyu Automotive Lighting SystemsLtd shareholders have received a total shareholder return of 13% over the last year. And that does include the dividend. Having said that, the five-year TSR of 26% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Changzhou Xingyu Automotive Lighting SystemsLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Changzhou Xingyu Automotive Lighting SystemsLtd (of which 1 makes us a bit uncomfortable!) you should know about.
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.