Zhongjin GoldLtd's (SHSE:600489) earnings growth rate lags the 11% CAGR delivered to shareholders

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the Zhongjin Gold Corp.,Ltd (SHSE:600489) share price is up 52% in the last 5 years, clearly besting the market return of around 2.9% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 27% in the last year, including dividends.

While the stock has fallen 4.4% 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 Zhongjin GoldLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, Zhongjin GoldLtd achieved compound earnings per share (EPS) growth of 33% per year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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 interactive report on Zhongjin GoldLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Zhongjin GoldLtd the TSR over the last 5 years was 68%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Zhongjin GoldLtd shareholders have received a total shareholder return of 27% over one year. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Zhongjin GoldLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Zhongjin GoldLtd .

Of course Zhongjin GoldLtd may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.