Suzhou Dongshan Precision Manufacturing (SZSE:002384) shareholders notch a 144% return over 1 year, yet earnings have been shrinking

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the Suzhou Dongshan Precision Manufacturing Co., Ltd. (SZSE:002384) share price has soared 140% in the last 1 year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 39% over the last quarter. Also impressive, the stock is up 55% over three years, making long term shareholders happy, too.

The past week has proven to be lucrative for Suzhou Dongshan Precision Manufacturing investors, so let's see if fundamentals drove the company's one-year performance.

Check out our latest analysis for Suzhou Dongshan Precision Manufacturing

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. 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 the last year, Suzhou Dongshan Precision Manufacturing actually saw its earnings per share drop 21%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 0.7% dividend yield is doing much to support the share price. We think that the revenue growth of 20% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Suzhou Dongshan Precision Manufacturing is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

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. As it happens, Suzhou Dongshan Precision Manufacturing's TSR for the last 1 year was 144%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Suzhou Dongshan Precision Manufacturing has rewarded shareholders with a total shareholder return of 144% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Suzhou Dongshan Precision Manufacturing you should know about.

But note: Suzhou Dongshan Precision Manufacturing may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.