Anhui Hengyuan Coal Industry and Electricity PowerLtd's (SHSE:600971) five-year earnings growth trails the splendid shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Anhui Hengyuan Coal Industry and Electricity Power Co.,Ltd (SHSE:600971) share price has soared 121% in the last half decade. Most would be very happy with that. And in the last week the share price has popped 4.0%.

Since the stock has added CN¥564m 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 Anhui Hengyuan Coal Industry and Electricity PowerLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Anhui Hengyuan Coal Industry and Electricity PowerLtd managed to grow its earnings per share at 8.2% a year. This EPS growth is lower than the 17% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings 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 Anhui Hengyuan Coal Industry and Electricity PowerLtd has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Anhui Hengyuan Coal Industry and Electricity PowerLtd the TSR over the last 5 years was 221%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Anhui Hengyuan Coal Industry and Electricity PowerLtd shareholders have received a total shareholder return of 66% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 26%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 - Anhui Hengyuan Coal Industry and Electricity PowerLtd has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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