The total return for Shenyang Xingqi PharmaceuticalLtd (SZSE:300573) investors has risen faster than earnings growth over the last five years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Shenyang Xingqi Pharmaceutical Co.,Ltd. (SZSE:300573) shares for the last five years, while they gained 661%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 58% over the last quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.

While the stock has fallen 9.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for Shenyang Xingqi PharmaceuticalLtd

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Shenyang Xingqi PharmaceuticalLtd achieved compound earnings per share (EPS) growth of 70% per year. This EPS growth is higher than the 50% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. Of course, with a P/E ratio of 127.51, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Shenyang Xingqi PharmaceuticalLtd has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Shenyang Xingqi PharmaceuticalLtd will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Shenyang Xingqi PharmaceuticalLtd, it has a TSR of 688% for the last 5 years. 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 Shenyang Xingqi PharmaceuticalLtd shareholders have received a total shareholder return of 103% over one year. Of course, that includes the dividend. That's better than the annualised return of 51% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Shenyang Xingqi PharmaceuticalLtd , and understanding them should be part of your investment process.

We will like Shenyang Xingqi PharmaceuticalLtd 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.

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

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.