WuXi Xinje ElectricLtd's (SHSE:603416) earnings growth rate lags the 7.1% CAGR delivered to shareholders

WuXi Xinje Electric Co.,Ltd. (SHSE:603416) shareholders might be concerned after seeing the share price drop 12% in the last week. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 37% has certainly bested the market return!

While the stock has fallen 12% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for WuXi Xinje ElectricLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over half a decade, WuXi Xinje ElectricLtd managed to grow its earnings per share at 6.8% a year. This EPS growth is reasonably close to the 6% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that WuXi Xinje ElectricLtd has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for WuXi Xinje ElectricLtd the TSR over the last 5 years was 41%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

WuXi Xinje ElectricLtd shareholders are up 4.1% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 7% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand WuXi Xinje ElectricLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for WuXi Xinje ElectricLtd you should know about.

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.