Huada Automotive TechnologyLtd's (SHSE:603358) earnings growth rate lags the 30% CAGR delivered to shareholders

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. 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 instance, the price of Huada Automotive Technology Corp.,Ltd (SHSE:603358) stock is up an impressive 240% over the last five years. Also pleasing for shareholders was the 32% gain in the last three months.

Since the long term performance has been good but there's been a recent pullback of 3.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Huada Automotive TechnologyLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During five years of share price growth, Huada Automotive TechnologyLtd achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is lower than the 28% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Huada Automotive TechnologyLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Huada Automotive TechnologyLtd will grow revenue in the future.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Huada Automotive TechnologyLtd, it has a TSR of 265% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Huada Automotive TechnologyLtd has rewarded shareholders with a total shareholder return of 48% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 30% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 1 warning sign for Huada Automotive TechnologyLtd that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com