Guangdong Vanward New Electric (SZSE:002543) shareholders notch a 17% CAGR over 3 years, yet earnings have been shrinking

Guangdong Vanward New Electric Co., Ltd. (SZSE:002543) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 39% during that period.

Since the stock has added CN¥596m 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 Guangdong Vanward New Electric

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 the last three years, Guangdong Vanward New Electric failed to grow earnings per share, which fell 1.2% (annualized).

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. So other metrics may hold the key to understanding what is influencing investors.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Guangdong Vanward New Electric has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Guangdong Vanward New Electric stock, you should check out this free report showing analyst profit forecasts.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Guangdong Vanward New Electric, it has a TSR of 59% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Guangdong Vanward New Electric shareholders have received a total shareholder return of 20% over the last year. That's including the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Guangdong Vanward New Electric has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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