If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Hebei Yichen Industrial Group Corporation Limited (HKG:1596) share price is 31% higher than it was a year ago, much better than the market return of around 0.6% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 31% lower than it was three years ago.
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. 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.
Hebei Yichen Industrial Group was able to grow EPS by 30% in the last twelve months. This EPS growth is reasonably close to the 31% increase in the share price. This makes us think the market hasn’t really changed its sentiment around the company, in the last year. We don’t think its coincidental that the share price is growing at a similar rate to the earnings per share.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Hebei Yichen Industrial Group’s key metrics by checking this interactive graph of Hebei Yichen Industrial Group’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Hebei Yichen Industrial Group’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Hebei Yichen Industrial Group shareholders, and that cash payout contributed to why its TSR of 33%, over the last year, is better than the share price return.
A Different Perspective
It’s nice to see that Hebei Yichen Industrial Group shareholders have gained 33% (in total) over the last year. And yes, that does include the dividend. This recent result is much better than the 8.5% drop suffered by shareholders each year (on average) over the last three. We’re generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. It’s always interesting to track share price performance over the longer term. But to understand Hebei Yichen Industrial Group better, we need to consider many other factors. Even so, be aware that Hebei Yichen Industrial Group is showing 1 warning sign in our investment analysis , you should know about…
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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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. 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.
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