Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Mayinglong Pharmaceutical Group Co., Ltd. (SHSE:600993) share price is up 82% in the last 5 years, clearly besting the market return of around 36% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 8.4% , including dividends .
The past week has proven to be lucrative for Mayinglong Pharmaceutical Group investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for Mayinglong Pharmaceutical Group
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.
Over half a decade, Mayinglong Pharmaceutical Group managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Mayinglong Pharmaceutical Group's key metrics by checking this interactive graph of Mayinglong Pharmaceutical Group'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. We note that for Mayinglong Pharmaceutical Group the TSR over the last 5 years was 93%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Mayinglong Pharmaceutical Group shareholders have received a total shareholder return of 8.4% over the last year. That's including the dividend. However, the TSR over five years, coming in at 14% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Mayinglong Pharmaceutical Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Mayinglong Pharmaceutical Group you should be aware of, and 1 of them can't be ignored.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
