Dalian BIO-CHEM's (SHSE:603360) three-year earnings growth trails the 81% YoY shareholder returns

For us, stock picking is in large part the hunt for the truly magnificent stocks. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Dalian BIO-CHEM Company Limited (SHSE:603360) share price is up a whopping 440% in the last three years, a handsome return for long term holders. On top of that, the share price is up 63% in about a quarter.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Dalian BIO-CHEM

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 three years of share price growth, Dalian BIO-CHEM achieved compound earnings per share growth of 15% per year. This EPS growth is lower than the 75% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 59.38.

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

Dive deeper into Dalian BIO-CHEM's key metrics by checking this interactive graph of Dalian BIO-CHEM's earnings, revenue and cash flow.

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. In the case of Dalian BIO-CHEM, it has a TSR of 491% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Dalian BIO-CHEM shareholders have received a total shareholder return of 351% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 33% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Dalian BIO-CHEM that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.