Shengyi TechnologyLtd's (SHSE:600183) five-year earnings growth trails the notable shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Shengyi Technology Co.,Ltd. (SHSE:600183) share price is up 61% in the last 5 years, clearly besting the market return of around 3.2% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 50%, including dividends.

The past week has proven to be lucrative for Shengyi TechnologyLtd investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for Shengyi TechnologyLtd

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, Shengyi TechnologyLtd achieved compound earnings per share (EPS) growth of 3.3% per year. This EPS growth is slower than the share price growth of 10% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

Dive deeper into Shengyi TechnologyLtd's key metrics by checking this interactive graph of Shengyi TechnologyLtd's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Shengyi TechnologyLtd's TSR for the last 5 years was 82%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Shengyi TechnologyLtd has rewarded shareholders with a total shareholder return of 50% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Shengyi TechnologyLtd better, we need to consider many other factors. For example, we've discovered 1 warning sign for Shengyi TechnologyLtd 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.

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