The total return for Suzhou Hesheng Special Material (SZSE:002290) investors has risen faster than earnings growth over the last five years

While Suzhou Hesheng Special Material Co., Ltd. (SZSE:002290) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 24% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 132% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.

In light of the stock dropping 13% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Suzhou Hesheng Special Material

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Suzhou Hesheng Special Material managed to grow its earnings per share at 13% a year. This EPS growth is lower than the 18% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

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..

A Different Perspective

While it's certainly disappointing to see that Suzhou Hesheng Special Material shares lost 6.6% throughout the year, that wasn't as bad as the market loss of 17%. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before deciding if you like the current share price, check how Suzhou Hesheng Special Material scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.