Humanwell Healthcare (Group)Ltd (SHSE:600079) delivers shareholders respectable 14% CAGR over 5 years, surging 4.5% in the last week alone

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Humanwell Healthcare (Group) Co.,Ltd. (SHSE:600079) shareholders have enjoyed a 80% share price rise over the last half decade, well in excess of the market return of around 20% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.0% in the last year, including dividends.

The past week has proven to be lucrative for Humanwell Healthcare (Group)Ltd investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Humanwell Healthcare (Group)Ltd

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 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 the five years of share price growth, Humanwell Healthcare (Group)Ltd moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Humanwell Healthcare (Group)Ltd share price is up 10.0% in the last three years. Meanwhile, EPS is up 5.0% per year. This EPS growth is higher than the 3.2% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

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

Dive deeper into Humanwell Healthcare (Group)Ltd's key metrics by checking this interactive graph of Humanwell Healthcare (Group)Ltd'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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Humanwell Healthcare (Group)Ltd's TSR for the last 5 years was 90%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Humanwell Healthcare (Group)Ltd provided a TSR of 2.0% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 14% per year for five years. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Humanwell Healthcare (Group)Ltd , and understanding them should be part of your investment process.

We will like Humanwell Healthcare (Group)Ltd 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.