The one-year returns for Dongxing Securities' (SHSE:601198) shareholders have been respectable, yet its earnings growth was even better

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Dongxing Securities Corporation Limited (SHSE:601198) share price is 41% higher than it was a year ago, much better than the market return of around 4.4% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 0.8% in the last three years.

The past week has proven to be lucrative for Dongxing Securities investors, so let's see if fundamentals drove the company's one-year performance.

View our latest analysis for Dongxing Securities

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the last year Dongxing Securities grew its earnings per share (EPS) by 195%. This EPS growth is significantly higher than the 41% increase in the share price. So it seems like the market has cooled on Dongxing Securities, despite the growth. Interesting.

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

We know that Dongxing Securities has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Dongxing Securities the TSR over the last 1 year was 43%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Dongxing Securities has rewarded shareholders with a total shareholder return of 43% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Dongxing Securities better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Dongxing Securities (of which 2 make us uncomfortable!) you should know about.

We will like Dongxing Securities 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.

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

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.