Jiangsu Zhengdan Chemical Industry's (SZSE:300641) one-year total shareholder returns outpace the underlying earnings growth

The Jiangsu Zhengdan Chemical Industry Co., Ltd. (SZSE:300641) share price has had a bad week, falling 13%. But that isn't a problem when you consider how the share price has soared over the last year. In fact, it is up 399% in that time. So it is not that surprising to see the stock retrace a little. The real question is whether the fundamental business performance can justify the strong increase over the long term.

Although Jiangsu Zhengdan Chemical Industry has shed CN¥2.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Jiangsu Zhengdan Chemical Industry

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Jiangsu Zhengdan Chemical Industry was able to grow EPS by 76% in the last twelve months. The share price gain of 399% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago. The fairly generous P/E ratio of 251.62 also points to this optimism.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Jiangsu Zhengdan Chemical Industry's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Jiangsu Zhengdan Chemical Industry, it has a TSR of 404% for the last 1 year. 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 Jiangsu Zhengdan Chemical Industry shareholders have received a total shareholder return of 404% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 38%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Jiangsu Zhengdan Chemical Industry better, we need to consider many other factors. Even so, be aware that Jiangsu Zhengdan Chemical Industry is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com