Beijing Dahao TechnologyLtd's (SHSE:603025) 20% CAGR outpaced the company's earnings growth over the same five-year period

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Beijing Dahao Technology Corp.,Ltd (SHSE:603025) stock is up an impressive 128% over the last five years. Better yet, the share price has risen 3.0% in the last week. But this might be partly because the broader market had a good week last week, gaining 2.0%.

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

Check out our latest analysis for Beijing Dahao TechnologyLtd

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, Beijing Dahao TechnologyLtd achieved compound earnings per share (EPS) growth of 19% per year. That makes the EPS growth particularly close to the yearly share price growth of 18%. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Beijing Dahao TechnologyLtd, it has a TSR of 150% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Beijing Dahao TechnologyLtd shareholders have received a total shareholder return of 49% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 20%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Beijing Dahao TechnologyLtd better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Beijing Dahao TechnologyLtd you should be aware of.

Of course Beijing Dahao TechnologyLtd 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.