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

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Anhui Hengyuan Coal Industry and Electricity Power Co.,Ltd (SHSE:600971) shareholders have enjoyed a 79% share price rise over the last half decade, well in excess of the market return of around 13% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 18%, including dividends.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Anhui Hengyuan Coal Industry and Electricity 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...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Anhui Hengyuan Coal Industry and Electricity PowerLtd managed to grow its earnings per share at 5.9% a year. This EPS growth is slower than the share price growth of 12% per year, over the same period. 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).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Anhui Hengyuan Coal Industry and Electricity PowerLtd's TSR for the last 5 years was 160%, 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 Anhui Hengyuan Coal Industry and Electricity PowerLtd has rewarded shareholders with a total shareholder return of 18% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 21% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Anhui Hengyuan Coal Industry and Electricity PowerLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Anhui Hengyuan Coal Industry and Electricity PowerLtd , and understanding them should be part of your investment process.

We will like Anhui Hengyuan Coal Industry and Electricity 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.