Foxconn Industrial Internet (SHSE:601138) jumps 6.5% this week, though earnings growth is still tracking behind three-year shareholder returns

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Foxconn Industrial Internet Co., Ltd. (SHSE:601138) share price is up 91% in the last three years, clearly besting the market decline of around 19% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 70% in the last year, including dividends.

The past week has proven to be lucrative for Foxconn Industrial Internet investors, so let's see if fundamentals drove the company's three-year performance.

Check out our latest analysis for Foxconn Industrial Internet

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Foxconn Industrial Internet achieved compound earnings per share growth of 4.8% per year. This EPS growth is lower than the 24% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.

You can see below how EPS has changed over time (discover 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Foxconn Industrial Internet's TSR for the last 3 years was 112%, 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 nice to see that Foxconn Industrial Internet shareholders have received a total shareholder return of 70% over the last year. And that does include the dividend. That's better than the annualised return of 8% 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. It's always interesting to track share price performance over the longer term. But to understand Foxconn Industrial Internet better, we need to consider many other factors. Take risks, for example - Foxconn Industrial Internet has 1 warning sign we think you should be aware of.

Of course Foxconn Industrial Internet may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.