Earnings growth outpaced the notable 5.4% CAGR delivered to Zhejiang Huahai Pharmaceutical (SHSE:600521) shareholders over the last five years

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Zhejiang Huahai Pharmaceutical Co., Ltd. (SHSE:600521) share price is up 24% in the last 5 years, clearly besting the market decline of around 0.02% (ignoring dividends).

Since it's been a strong week for Zhejiang Huahai Pharmaceutical shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Zhejiang Huahai Pharmaceutical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Over half a decade, Zhejiang Huahai Pharmaceutical managed to grow its earnings per share at 60% a year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Zhejiang Huahai Pharmaceutical's TSR for the last 5 years was 30%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Although it hurts that Zhejiang Huahai Pharmaceutical returned a loss of 2.1% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 5% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. For instance, we've identified 2 warning signs for Zhejiang Huahai Pharmaceutical that you should be aware of.

But note: Zhejiang Huahai Pharmaceutical may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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