Kunshan Kinglai Hygienic MaterialsLtd's (SZSE:300260) five-year total shareholder returns outpace the underlying earnings growth

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the Kunshan Kinglai Hygienic Materials Co.,Ltd. (SZSE:300260) share price is up a whopping 320% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 60% gain in the last three months. But this could be related to the strong market, which is up 33% in the last three months.

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.

See our latest analysis for Kunshan Kinglai Hygienic MaterialsLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Kunshan Kinglai Hygienic MaterialsLtd managed to grow its earnings per share at 34% a year. This EPS growth is remarkably close to the 33% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

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

We know that Kunshan Kinglai Hygienic MaterialsLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Kunshan Kinglai Hygienic MaterialsLtd will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Kunshan Kinglai Hygienic MaterialsLtd the TSR over the last 5 years was 326%, 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

While the broader market gained around 12% in the last year, Kunshan Kinglai Hygienic MaterialsLtd shareholders lost 19% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 34% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Kunshan Kinglai Hygienic MaterialsLtd better, we need to consider many other factors. Take risks, for example - Kunshan Kinglai Hygienic MaterialsLtd has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

We will like Kunshan Kinglai Hygienic MaterialsLtd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.