Investing in Chongqing Changan Automobile (SZSE:000625) five years ago would have delivered you a 287% gain

Chongqing Changan Automobile Company Limited (SZSE:000625) shareholders have seen the share price descend 15% over the month. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 271% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Chongqing Changan Automobile

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the last half decade, Chongqing Changan Automobile became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Chongqing Changan Automobile share price is up 23% in the last three years. Meanwhile, EPS is up 13% per year. This EPS growth is higher than the 7% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

This free interactive report on Chongqing Changan Automobile's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Chongqing Changan Automobile the TSR over the last 5 years was 287%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Chongqing Changan Automobile has rewarded shareholders with a total shareholder return of 22% in the last twelve months. That's including the dividend. However, that falls short of the 31% TSR per annum it has made for shareholders, each year, over five years. 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. To that end, you should be aware of the 3 warning signs we've spotted with Chongqing Changan Automobile .

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.