The 5.5% return this week takes Zhejiang VIE Science & Technology's (SZSE:002590) shareholders five-year gains to 138%

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Zhejiang VIE Science & Technology Co., Ltd. (SZSE:002590) shareholders would be well aware of this, since the stock is up 129% in five years. On top of that, the share price is up 28% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 24% in 90 days).

Since it's been a strong week for Zhejiang VIE Science & Technology shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Zhejiang VIE Science & Technology

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Zhejiang VIE Science & Technology moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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. Indeed, the Zhejiang VIE Science & Technology share price has gained 73% in three years. Meanwhile, EPS is up 72% per year. This EPS growth is higher than the 20% 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 graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Zhejiang VIE Science & Technology's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Zhejiang VIE Science & Technology shareholders, and that cash payout contributed to why its TSR of 138%, over the last 5 years, is better than the share price return.

A Different Perspective

It's nice to see that Zhejiang VIE Science & Technology shareholders have received a total shareholder return of 11% over the last year. However, that falls short of the 19% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang VIE Science & Technology , and understanding them should be part of your investment process.

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.

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

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.