Zhejiang Ausun Pharmaceutical's (SHSE:603229) 18% CAGR outpaced the company's earnings growth over the same five-year period

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Zhejiang Ausun Pharmaceutical Co., Ltd. (SHSE:603229) stock is up an impressive 122% over the last five years. On top of that, the share price is up 27% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 29% in 90 days).

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

Check out our latest analysis for Zhejiang Ausun Pharmaceutical

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Zhejiang Ausun Pharmaceutical achieved compound earnings per share (EPS) growth of 31% per year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

This free interactive report on Zhejiang Ausun Pharmaceutical'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Zhejiang Ausun Pharmaceutical the TSR over the last 5 years was 127%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Zhejiang Ausun Pharmaceutical shareholders are down 17% for the year (even including dividends), but the market itself is up 7.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Ausun Pharmaceutical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Zhejiang Ausun Pharmaceutical you should know about.

We will like Zhejiang Ausun 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.