When you buy a stock there is always a possibility that it could drop 100%. 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 example, the Zhejiang Jolly Pharmaceutical Co.,LTD (SZSE:300181) share price has soared 250% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 15%. But the price may well have benefitted from a buoyant market, since stocks have gained 11% in the last thirty days.

Since the stock has added CN¥714m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Zhejiang Jolly PharmaceuticalLTD managed to grow its earnings per share at 69% a year. The EPS growth is more impressive than the yearly share price gain of 28% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Zhejiang Jolly PharmaceuticalLTD has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Zhejiang Jolly PharmaceuticalLTD's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Zhejiang Jolly PharmaceuticalLTD the TSR over the last 5 years was 284%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Zhejiang Jolly PharmaceuticalLTD has rewarded shareholders with a total shareholder return of 68% in the last twelve months. And that does include the dividend. That's better than the annualised return of 31% 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. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Jolly PharmaceuticalLTD better, we need to consider many other factors. Even so, be aware that Zhejiang Jolly PharmaceuticalLTD is showing 1 warning sign in our investment analysis , you should know about...

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.