Xinjiang Joinworld (SHSE:600888) stock performs better than its underlying earnings growth over last five years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Xinjiang Joinworld share price has climbed 63% in five years, easily topping the market return of 6.0% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.8%, including dividends.

Since it's been a strong week for Xinjiang Joinworld shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Xinjiang Joinworld

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Xinjiang Joinworld achieved compound earnings per share (EPS) growth of 38% per year. The EPS growth is more impressive than the yearly share price gain of 10% over the same period. 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 7.59.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Xinjiang Joinworld's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Xinjiang Joinworld the TSR over the last 5 years was 99%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Xinjiang Joinworld shareholders are up 3.8% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 15% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Xinjiang Joinworld better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Xinjiang Joinworld you should know about.

Of course Xinjiang Joinworld 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.