ShenZhen Woer Heat-Shrinkable MaterialLtd (SZSE:002130) sheds 19% this week, as yearly returns fall more in line with earnings growth

ShenZhen Woer Heat-Shrinkable Material Co.,Ltd. (SZSE:002130) shareholders might be concerned after seeing the share price drop 19% in the last week. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 349%. Impressive! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

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.

Check out our latest analysis for ShenZhen Woer Heat-Shrinkable MaterialLtd

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, ShenZhen Woer Heat-Shrinkable MaterialLtd achieved compound earnings per share (EPS) growth of 58% per year. The EPS growth is more impressive than the yearly share price gain of 35% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

We know that ShenZhen Woer Heat-Shrinkable MaterialLtd has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ShenZhen Woer Heat-Shrinkable MaterialLtd's TSR for the last 5 years was 364%, 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 ShenZhen Woer Heat-Shrinkable MaterialLtd shareholders have received a total shareholder return of 225% over the last year. That's including the dividend. That's better than the annualised return of 36% over half a decade, implying that the company is doing better recently. 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 ShenZhen Woer Heat-Shrinkable MaterialLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for ShenZhen Woer Heat-Shrinkable MaterialLtd you should know about.

Of course ShenZhen Woer Heat-Shrinkable MaterialLtd 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.