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The total return for Emei Shan TourismLtd (SZSE:000888) investors has risen faster than earnings growth over the last three years
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the Emei Shan Tourism Co.,Ltd (SZSE:000888) share price is 120% higher than it was three years ago. Most would be happy with that. Also pleasing for shareholders was the 20% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 31% in 90 days).
Since the long term performance has been good but there's been a recent pullback of 5.3%, let's check if the fundamentals match the share price.
View our latest analysis for Emei Shan TourismLtd
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Emei Shan TourismLtd was able to grow its EPS at 36% per year over three years, sending the share price higher. We note that the 30% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Emei Shan TourismLtd has grown profits over the years, but the future is more important for shareholders. This free interactive report on Emei Shan TourismLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. As it happens, Emei Shan TourismLtd's TSR for the last 3 years was 126%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Emei Shan TourismLtd has rewarded shareholders with a total shareholder return of 57% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 17% 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. 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. To that end, you should be aware of the 2 warning signs we've spotted with Emei Shan TourismLtd .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.
Valuation is complex, but we're here to simplify it.
Discover if Emei Shan TourismLtd might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SZSE:000888
Excellent balance sheet average dividend payer.