Anhui Jianghuai Automobile GroupLtd (SHSE:600418) grows 9.7% this week, taking five-year gains to 766%

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Anhui Jianghuai Automobile Group Corp.,Ltd. (SHSE:600418) share price. It's 759% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 24% gain in the last three months. Anyone who held for that rewarding ride would probably be keen to talk about it.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Anhui Jianghuai Automobile GroupLtd

While Anhui Jianghuai Automobile GroupLtd made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Anhui Jianghuai Automobile GroupLtd saw its revenue shrink by 1.3% per year. This is in stark contrast to the strong share price growth of 54%, compound, per year. Obviously, whatever the market is excited about, it's not a track record of revenue growth. At the risk of upsetting holders, this does suggest that hope for a better future is playing a significant role in the share price action.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Anhui Jianghuai Automobile GroupLtd

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Anhui Jianghuai Automobile GroupLtd, it has a TSR of 766% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Anhui Jianghuai Automobile GroupLtd has rewarded shareholders with a total shareholder return of 209% in the last twelve months. And that does include the dividend. That's better than the annualised return of 54% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Anhui Jianghuai Automobile GroupLtd better, we need to consider many other factors. For example, we've discovered 1 warning sign for Anhui Jianghuai Automobile GroupLtd that you should be aware of before investing here.

But note: Anhui Jianghuai Automobile GroupLtd 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.