Jiangxi Lian Chuang Optoelectronic Science And Technology Co.,lTd. (SHSE:600363) shareholders might be concerned after seeing the share price drop 16% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 89% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 28% decline over the last twelve months.
While the stock has fallen 4.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is lower than the 14% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd the TSR over the last 5 years was 91%, 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
We regret to report that Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 20%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before deciding if you like the current share price, check how Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd scores on these 3 valuation metrics.
But note: Jiangxi Lian Chuang Optoelectronic Science And TechnologylTd 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.
