Sailun Group Co., Ltd. (SHSE:601058) shareholders might be concerned after seeing the share price drop 12% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 374% in that time. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
Although Sailun Group has shed CN¥1.4b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
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, Sailun Group achieved compound earnings per share (EPS) growth of 33% per year. So the EPS growth rate is rather close to the annualized share price gain of 36% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Sailun Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. As it happens, Sailun Group's TSR for the last 5 years was 408%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Sailun Group has rewarded shareholders with a total shareholder return of 43% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 38% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Sailun Group you should be aware of.
But note: Sailun Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.