Changchun UP OptotechLtd (SZSE:002338) jumps 11% this week, though earnings growth is still tracking behind five-year shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Changchun UP Optotech Co.,Ltd. (SZSE:002338) share price has soared 104% in the last half decade. Most would be very happy with that. It's even up 11% in the last week.

Since the stock has added CN¥674m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Changchun UP OptotechLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Changchun UP OptotechLtd achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is reasonably close to the 15% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Changchun UP OptotechLtd 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?

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Changchun UP OptotechLtd's TSR for the last 5 years was 107%, 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

While it's never nice to take a loss, Changchun UP OptotechLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 3.6% wasn't as bad as the market loss of around 15%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 16% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Is Changchun UP OptotechLtd cheap compared to other companies? These 3 valuation measures might help you decide.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.