Zhejiang Huayou Cobalt (SHSE:603799) pulls back 10% this week, but still delivers shareholders notable 10% CAGR over 5 years

The Zhejiang Huayou Cobalt Co., Ltd (SHSE:603799) share price has had a bad week, falling 10%. On the bright side the returns have been quite good over the last half decade. Its return of 55% has certainly bested the market return! Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 54% decline over the last three years: that's a long time to wait for profits.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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, Zhejiang Huayou Cobalt became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. 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. In fact, the Zhejiang Huayou Cobalt stock price is 54% lower in the last three years. Meanwhile, EPS is up 2.8% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -23% per year.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Zhejiang Huayou Cobalt'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. As it happens, Zhejiang Huayou Cobalt's TSR for the last 5 years was 63%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Zhejiang Huayou Cobalt has rewarded shareholders with a total shareholder return of 34% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% 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 Zhejiang Huayou Cobalt better, we need to consider many other factors. Take risks, for example - Zhejiang Huayou Cobalt has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

But note: Zhejiang Huayou Cobalt may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.