We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. To wit, the Shanxi Coal International Energy Group Co.,Ltd (SHSE:600546) share price has soared 412% over five years. This just goes to show the value creation that some businesses can achieve. In more good news, the share price has risen 14% in thirty days.
The past week has proven to be lucrative for Shanxi Coal International Energy GroupLtd investors, so let's see if fundamentals drove the company's five-year performance.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Shanxi Coal International Energy GroupLtd managed to grow its earnings per share at 57% a year. This EPS growth is higher than the 39% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 6.72 also suggests market apprehension.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Shanxi Coal International Energy GroupLtd has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shanxi Coal International Energy GroupLtd the TSR over the last 5 years was 547%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Shanxi Coal International Energy GroupLtd shareholders have received a total shareholder return of 35% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 45% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Shanxi Coal International Energy GroupLtd better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Shanxi Coal International Energy GroupLtd you should be aware of.
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.
