Despite lower earnings than a year ago, Youngor Fashion (SHSE:600177) investors are up 41% since then

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Youngor Fashion Co., Ltd. (SHSE:600177) share price is 29% higher than it was a year ago, much better than the market return of around 3.9% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the share price is 24% higher than it was three years ago.

Since the long term performance has been good but there's been a recent pullback of 3.6%, let's check if the fundamentals match the share price.

See our latest analysis for Youngor Fashion

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 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.

Over the last twelve months, Youngor Fashion actually shrank its EPS by 9.0%.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the Youngor Fashion's share price. Rather, we'd posit that the revenue increase of 55% might be more meaningful. After all, it's not necessarily a bad thing if a business sacrifices profits today in pursuit of profit tomorrow (metaphorically speaking).

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Youngor Fashion's TSR for the last 1 year was 41%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Youngor Fashion has rewarded shareholders with a total shareholder return of 41% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 11% 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. For example, we've discovered 3 warning signs for Youngor Fashion (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.