Shanxi Coking Coal Energy Group (SZSE:000983) sheds 4.6% this week, as yearly returns fall more in line with earnings growth

The last three months have been tough on Shanxi Coking Coal Energy Group Co., Ltd. (SZSE:000983) shareholders, who have seen the share price decline a rather worrying 31%. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 70% in that time.

While the stock has fallen 4.6% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Shanxi Coking Coal Energy Group

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 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).

During five years of share price growth, Shanxi Coking Coal Energy Group achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is higher than the 11% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.31.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Shanxi Coking Coal Energy Group, it has a TSR of 130% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Shanxi Coking Coal Energy Group shareholders have received a total shareholder return of 3.1% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 18% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Case in point: We've spotted 2 warning signs for Shanxi Coking Coal Energy Group you should be aware of.

We will like Shanxi Coking Coal Energy Group 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.