These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the HPGC Renmintongtai Pharmaceutical Corporation (SHSE:600829) share price is up 39% in the last five years, slightly above the market return. It's also good to see that the stock is up 17% in a year.
Since the stock has added CN¥389m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for HPGC Renmintongtai Pharmaceutical
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, HPGC Renmintongtai Pharmaceutical managed to grow its earnings per share at 4.7% a year. This EPS growth is lower than the 7% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. 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).
It might be well worthwhile taking a look at our free report on HPGC Renmintongtai Pharmaceutical's earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between HPGC Renmintongtai Pharmaceutical's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. HPGC Renmintongtai Pharmaceutical's TSR of 42% for the 5 years exceeded its share price return, because it has paid dividends.
A Different Perspective
It's good to see that HPGC Renmintongtai Pharmaceutical has rewarded shareholders with a total shareholder return of 17% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Is HPGC Renmintongtai Pharmaceutical cheap compared to other companies? These 3 valuation measures might help you decide.
We will like HPGC Renmintongtai Pharmaceutical better if we see some big insider buys. While we wait, check out this free list of growing companies 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.