When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of MeiHua Holdings Group Co.,Ltd (SHSE:600873) stock is up an impressive 122% over the last five years. It's even up 6.1% in the last week.
The past week has proven to be lucrative for MeiHua Holdings GroupLtd investors, so let's see if fundamentals drove the company's five-year performance.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During five years of share price growth, MeiHua Holdings GroupLtd achieved compound earnings per share (EPS) growth of 26% per year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.50.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that MeiHua Holdings GroupLtd has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at MeiHua Holdings GroupLtd's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of MeiHua Holdings GroupLtd, it has a TSR of 200% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that MeiHua Holdings GroupLtd has rewarded shareholders with a total shareholder return of 21% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand MeiHua Holdings GroupLtd better, we need to consider many other factors. Even so, be aware that MeiHua Holdings GroupLtd is showing 1 warning sign in our investment analysis , you should know about...
Of course MeiHua Holdings GroupLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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