Shenzhen Sinexcel ElectricLtd (SZSE:300693) stock performs better than its underlying earnings growth over last five years

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. To wit, the Shenzhen Sinexcel Electric Co.,Ltd. (SZSE:300693) share price has soared 308% over five years. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 18%.

Since the stock has added CN¥844m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Shenzhen Sinexcel ElectricLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Shenzhen Sinexcel ElectricLtd managed to grow its earnings per share at 55% a year. The EPS growth is more impressive than the yearly share price gain of 32% over the same period. 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).

We know that Shenzhen Sinexcel ElectricLtd has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shenzhen Sinexcel ElectricLtd the TSR over the last 5 years was 320%, 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 9.2% in the last year, Shenzhen Sinexcel ElectricLtd shareholders lost 1.9% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 33%, each year, over five years. 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. 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. For instance, we've identified 2 warning signs for Shenzhen Sinexcel ElectricLtd (1 is concerning) that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.