Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Jiangsu Hoperun Software Co., Ltd. (SZSE:300339) share price is up a whopping 472% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 278% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
Since the stock has added CN¥11b to its market cap in the past week alone, let's see if underlying performance has been driving long-term 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Jiangsu Hoperun Software's earnings per share are down 9.8% per year, despite strong share price performance over five years.
Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
On the other hand, Jiangsu Hoperun Software's revenue is growing nicely, at a compound rate of 8.7% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Jiangsu Hoperun Software has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Jiangsu Hoperun Software will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Jiangsu Hoperun Software shareholders have received a total shareholder return of 199% over the last year. That's better than the annualised return of 42% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 2 warning signs for Jiangsu Hoperun Software (1 is a bit concerning) that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.
