Guangxi Liugong Machinery (SZSE:000528) shareholders have earned a 68% return over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Guangxi Liugong Machinery Co., Ltd. (SZSE:000528) share price is up 65% in the last 1 year, clearly besting the market return of around 9.8% (not including dividends). So that should have shareholders smiling. And shareholders have also done well over the long term, with an increase of 42% in the last three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Guangxi Liugong Machinery

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Guangxi Liugong Machinery was able to grow EPS by 61% in the last twelve months. We note that the earnings per share growth isn't far from the share price growth (of 65%). That suggests that the market sentiment around the company hasn't changed much over that time. It looks like the share price is responding to the EPS.

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

We know that Guangxi Liugong Machinery 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Guangxi Liugong Machinery the TSR over the last 1 year was 68%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Guangxi Liugong Machinery shareholders have received a total shareholder return of 68% over the last year. That's including the dividend. That's better than the annualised return of 12% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 1 warning sign for Guangxi Liugong Machinery that you should be aware of.

Of course Guangxi Liugong Machinery 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.