Did Xinyuan Real Estate's (NYSE:XIN) Share Price Deserve to Gain 42%?

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Xinyuan Real Estate Co., Ltd. (NYSE:XIN) share price is up 42% in the last five years, that's less than the market return. However, if you include the dividends then the return is market beating. The last year has been disappointing, with the stock price down 12% in that time.

Check out our latest analysis for Xinyuan Real Estate

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, Xinyuan Real Estate managed to grow its earnings per share at 13% a year. The EPS growth is more impressive than the yearly share price gain of 7.3% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 2.11.

The image below shows how EPS has tracked over time.

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 Xinyuan Real Estate, it has a TSR of 102% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Xinyuan Real Estate shareholders are down 3.5% for the year (even including dividends) , but the market itself is up 3.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Xinyuan Real Estate you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

But note: Xinyuan Real Estate 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 US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.