The 12% return this week takes Guangdong Transtek Medical Electronics' (SZSE:300562) shareholders one-year gains to 110%

Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Guangdong Transtek Medical Electronics Co., Ltd (SZSE:300562) share price had more than doubled in just one year - up 104%. And in the last month, the share price has gained 14%. However, the longer term returns haven't been so impressive, with the stock up just 21% in the last three years.

Since the stock has added CN¥323m 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 Guangdong Transtek Medical Electronics

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 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 Guangdong Transtek Medical Electronics grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

We are skeptical of the suggestion that the 1.8% dividend yield would entice buyers to the stock. However the year on year revenue growth of 24% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Guangdong Transtek Medical Electronics

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Guangdong Transtek Medical Electronics the TSR over the last 1 year was 110%, 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 Guangdong Transtek Medical Electronics shareholders have received a total shareholder return of 110% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 5% per year over the last half decade. 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 Guangdong Transtek Medical Electronics better, we need to consider many other factors. For example, we've discovered 2 warning signs for Guangdong Transtek Medical Electronics that you should be aware of before investing here.

But note: Guangdong Transtek Medical Electronics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.