Ningbo Sanxing Medical ElectricLtd's (SHSE:601567) five-year total shareholder returns outpace the underlying earnings growth

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. For example, the Ningbo Sanxing Medical Electric Co.,Ltd. (SHSE:601567) share price is up a whopping 433% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 44% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Ningbo Sanxing Medical ElectricLtd

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Ningbo Sanxing Medical ElectricLtd achieved compound earnings per share (EPS) growth of 26% per year. This EPS growth is lower than the 40% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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 Ningbo Sanxing Medical ElectricLtd has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ningbo Sanxing Medical ElectricLtd's TSR for the last 5 years was 527%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Ningbo Sanxing Medical ElectricLtd shareholders have received a total shareholder return of 160% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 44% per year), it would seem that the stock's performance has improved in recent times. 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. To that end, you should be aware of the 1 warning sign we've spotted with Ningbo Sanxing Medical ElectricLtd .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.