CASTECH's (SZSE:002222) earnings growth rate lags the 26% CAGR delivered to shareholders

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 when you pick a company that is really flourishing, you can make more than 100%. Long term CASTECH Inc. (SZSE:002222) shareholders would be well aware of this, since the stock is up 203% in five years. It's also good to see the share price up 41% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 27% in 90 days).

While the stock has fallen 3.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for CASTECH

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.

During five years of share price growth, CASTECH achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is lower than the 25% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 69.60.

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

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

What About The Total Shareholder Return (TSR)?

We've already covered CASTECH's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for CASTECH shareholders, and that cash payout contributed to why its TSR of 216%, over the last 5 years, is better than the share price return.

A Different Perspective

We're pleased to report that CASTECH shareholders have received a total shareholder return of 17% over one year. However, that falls short of the 26% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on CASTECH you might want to consider these 3 valuation metrics.

Of course CASTECH 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.