Zhejiang Cfmoto PowerLtd (SHSE:603129) jumps 8.2% this week, though earnings growth is still tracking behind five-year shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Zhejiang Cfmoto Power Co.,Ltd (SHSE:603129) shares for the last five years, while they gained 640%. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 10% over the last quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.

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

See our latest analysis for Zhejiang Cfmoto PowerLtd

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, Zhejiang Cfmoto PowerLtd managed to grow its earnings per share at 50% a year. This EPS growth is remarkably close to the 49% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Zhejiang Cfmoto PowerLtd 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. 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. In the case of Zhejiang Cfmoto PowerLtd, it has a TSR of 674% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While it's certainly disappointing to see that Zhejiang Cfmoto PowerLtd shares lost 2.7% throughout the year, that wasn't as bad as the market loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 51% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Zhejiang Cfmoto PowerLtd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

We will like Zhejiang Cfmoto PowerLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com