Dianguang Explosion-proof TechnologyLtd's (SZSE:002730) five-year earnings growth trails the shareholder returns

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Dianguang Explosion-proof Technology Co.,Ltd. (SZSE:002730) shareholders have enjoyed a 19% share price rise over the last half decade, well in excess of the market return of around 15% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 8.0%, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Dianguang Explosion-proof TechnologyLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Over half a decade, Dianguang Explosion-proof TechnologyLtd managed to grow its earnings per share at 6.3% a year. This EPS growth is higher than the 4% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Dianguang Explosion-proof TechnologyLtd's key metrics by checking this interactive graph of Dianguang Explosion-proof TechnologyLtd's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Dianguang Explosion-proof TechnologyLtd the TSR over the last 5 years was 27%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Dianguang Explosion-proof TechnologyLtd shareholders gained a total return of 8.0% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Dianguang Explosion-proof TechnologyLtd is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.