Henan Mingtai Al.IndustrialLtd (SHSE:601677) sheds 5.5% this week, as yearly returns fall more in line with earnings growth

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Henan Mingtai Al.Industrial Co.,Ltd. (SHSE:601677) share price is up 67% in the last 5 years, clearly besting the market return of around 16% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 9.2%, 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.

Check out our latest analysis for Henan Mingtai Al.IndustrialLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Henan Mingtai Al.IndustrialLtd achieved compound earnings per share (EPS) growth of 6.3% per year. This EPS growth is slower than the share price growth of 11% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil 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. 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?

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Henan Mingtai Al.IndustrialLtd the TSR over the last 5 years was 76%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Henan Mingtai Al.IndustrialLtd shareholders have received a total shareholder return of 9.2% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 12% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Henan Mingtai Al.IndustrialLtd better, we need to consider many other factors. For example, we've discovered 2 warning signs for Henan Mingtai Al.IndustrialLtd that you should be aware of before investing here.

We will like Henan Mingtai Al.IndustrialLtd 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.