Hubei Feilihua Quartz Glass' (SZSE:300395) 26% CAGR outpaced the company's earnings growth over the same five-year period

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Hubei Feilihua Quartz Glass Co., Ltd. (SZSE:300395) which saw its share price drive 214% higher over five years. Also pleasing for shareholders was the 44% gain in the last three months. But this could be related to the strong market, which is up 29% in the last three months.

Since the stock has added CN¥776m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Hubei Feilihua Quartz Glass

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Hubei Feilihua Quartz Glass achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is slower than the share price growth of 26% 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 optimism is visible in its fairly high P/E ratio of 63.01.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Hubei Feilihua Quartz Glass' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 Hubei Feilihua Quartz Glass, it has a TSR of 222% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Hubei Feilihua Quartz Glass shareholders gained a total return of 5.8% during the year. Unfortunately this falls short of the market return. 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 26% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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 1 warning sign for Hubei Feilihua Quartz Glass that you should be aware of before investing here.

Of course Hubei Feilihua Quartz Glass 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.