Neway Valve (Suzhou) (SHSE:603699) jumps 3.3% this week, though earnings growth is still tracking behind three-year shareholder returns

It might be of some concern to shareholders to see the Neway Valve (Suzhou) Co., Ltd. (SHSE:603699) share price down 12% in the last month. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 68% during that period.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Neway Valve (Suzhou)

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...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Neway Valve (Suzhou) achieved compound earnings per share growth of 18% per year. This EPS growth is remarkably close to the 19% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS 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 Neway Valve (Suzhou) has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Neway Valve (Suzhou)'s TSR for the last 3 years was 86%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Neway Valve (Suzhou) shareholders have received a total shareholder return of 23% 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 12% 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. It's always interesting to track share price performance over the longer term. But to understand Neway Valve (Suzhou) better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Neway Valve (Suzhou) you should be aware of.

Of course Neway Valve (Suzhou) may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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