For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Henan Shenhuo Coal Industary and Electricity Power Corporation Limited (SZSE:000933) shares for the last five years, while they gained 410%. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 16% over the last quarter.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Henan Shenhuo Coal Industary and Electricity Power managed to grow its earnings per share at 92% a year. This EPS growth is higher than the 39% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.11.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Henan Shenhuo Coal Industary and Electricity Power has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Henan Shenhuo Coal Industary and Electricity Power's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Henan Shenhuo Coal Industary and Electricity Power the TSR over the last 5 years was 509%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Henan Shenhuo Coal Industary and Electricity Power shareholders have received a total shareholder return of 73% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 44%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Henan Shenhuo Coal Industary and Electricity Power , and understanding them should be part of your investment process.

We will like Henan Shenhuo Coal Industary and Electricity Power better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com