Yueyang Xingchang Petro-Chemical's (SZSE:000819) earnings growth rate lags the 21% CAGR delivered to shareholders

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term Yueyang Xingchang Petro-Chemical Co., Ltd. (SZSE:000819) shareholders would be well aware of this, since the stock is up 162% in five years. On top of that, the share price is up 21% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 27% in 90 days).

Since the long term performance has been good but there's been a recent pullback of 6.8%, let's check if the fundamentals match the share price.

View our latest analysis for Yueyang Xingchang Petro-Chemical

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. 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, Yueyang Xingchang Petro-Chemical achieved compound earnings per share (EPS) growth of 6.6% per year. This EPS growth is slower than the share price growth of 21% 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. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 71.42.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Yueyang Xingchang Petro-Chemical's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Yueyang Xingchang Petro-Chemical's TSR for the last 5 years was 164%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Yueyang Xingchang Petro-Chemical shareholders gained a total return of 1.8% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 21% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Case in point: We've spotted 2 warning signs for Yueyang Xingchang Petro-Chemical you should be aware of, and 1 of them is a bit concerning.

We will like Yueyang Xingchang Petro-Chemical 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.