Guangdong Kingstrong Technology (SZSE:300629) ascends 7.5% this week, taking five-year gains to 95%

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Guangdong Kingstrong Technology Co., Ltd. (SZSE:300629) shareholders have enjoyed a 91% share price rise over the last half decade, well in excess of the market return of around 12% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 23%, including dividends.

The past week has proven to be lucrative for Guangdong Kingstrong Technology investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Guangdong Kingstrong Technology

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Guangdong Kingstrong Technology became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Guangdong Kingstrong Technology share price is up 49% in the last three years. In the same period, EPS is up 15% per year. This EPS growth is remarkably close to the 14% average annual increase in the share price (over three years, again). So one might argue that investor sentiment towards the stock hss not changed much over time. Arguably the share price is reflecting the earnings per share.

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

Dive deeper into Guangdong Kingstrong Technology's key metrics by checking this interactive graph of Guangdong Kingstrong Technology's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Guangdong Kingstrong Technology the TSR over the last 5 years was 95%, 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 Guangdong Kingstrong Technology shareholders have received a total shareholder return of 23% over the last year. That's including the dividend. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Guangdong Kingstrong Technology you might want to consider these 3 valuation metrics.

But note: Guangdong Kingstrong Technology may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.