Changzhou Tenglong AutoPartsCo.Ltd (SHSE:603158) jumps 9.9% this week, though earnings growth is still tracking behind three-year shareholder returns

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Changzhou Tenglong AutoPartsCo.,Ltd. (SHSE:603158), which is up 43%, over three years, soundly beating the market return of 1.1% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 30%, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Changzhou Tenglong AutoPartsCo.Ltd

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.

During three years of share price growth, Changzhou Tenglong AutoPartsCo.Ltd achieved compound earnings per share growth of 17% per year. The average annual share price increase of 13% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

We know that Changzhou Tenglong AutoPartsCo.Ltd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Changzhou Tenglong AutoPartsCo.Ltd the TSR over the last 3 years was 49%, 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 Changzhou Tenglong AutoPartsCo.Ltd has rewarded shareholders with a total shareholder return of 30% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Changzhou Tenglong AutoPartsCo.Ltd you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.