Contemporary Amperex Technology (SZSE:300750) shareholders have earned a 40% CAGR over the last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Contemporary Amperex Technology Co., Limited (SZSE:300750) shares for the last five years, while they gained 421%. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 29% in about a quarter.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Contemporary Amperex Technology

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Contemporary Amperex Technology managed to grow its earnings per share at 57% a year. This EPS growth is higher than the 39% 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).

It is of course excellent to see how Contemporary Amperex Technology has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Contemporary Amperex Technology the TSR over the last 5 years was 440%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Contemporary Amperex Technology shares lost 6.4% throughout the year, that wasn't as bad as the market loss of 10%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 40% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Contemporary Amperex Technology better, we need to consider many other factors. For instance, we've identified 1 warning sign for Contemporary Amperex Technology that you should be aware of.

But note: Contemporary Amperex 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.