Wuxi Huaguang Environment & Energy GroupLtd's (SHSE:600475) earnings growth rate lags the 15% CAGR delivered to shareholders

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Wuxi Huaguang Environment & Energy GroupLtd share price has climbed 78% in five years, easily topping the market return of 15% (ignoring dividends).

In light of the stock dropping 6.9% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Wuxi Huaguang Environment & Energy GroupLtd

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.

Over half a decade, Wuxi Huaguang Environment & Energy GroupLtd managed to grow its earnings per share at 11% a year. This EPS growth is reasonably close to the 12% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Wuxi Huaguang Environment & Energy GroupLtd's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Wuxi Huaguang Environment & Energy GroupLtd's TSR for the last 5 years was 105%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Wuxi Huaguang Environment & Energy GroupLtd shareholders are down 9.4% over twelve months (even including dividends), which isn't far from the market return of -8.7%. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Wuxi Huaguang Environment & Energy GroupLtd better, we need to consider many other factors. Take risks, for example - Wuxi Huaguang Environment & Energy GroupLtd has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.