Shanghai Shyndec Pharmaceutical (SHSE:600420) stock performs better than its underlying earnings growth over last year

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Shanghai Shyndec Pharmaceutical Co., Ltd. (SHSE:600420) share price is 28% higher than it was a year ago, much better than the market return of around 9.7% (not including dividends) in the same period. So that should have shareholders smiling. Longer term, the stock is up 22% in three years.

Since the stock has added CN¥617m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Shanghai Shyndec Pharmaceutical

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Shanghai Shyndec Pharmaceutical was able to grow EPS by 26% in the last twelve months. This EPS growth is reasonably close to the 28% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.

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

We know that Shanghai Shyndec Pharmaceutical has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shanghai Shyndec Pharmaceutical the TSR over the last 1 year was 30%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Shanghai Shyndec Pharmaceutical shareholders have received a total shareholder return of 30% over the last year. And that does include the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Shanghai Shyndec Pharmaceutical you should know about.

We will like Shanghai Shyndec Pharmaceutical 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.