Shennan Circuit (SZSE:002916) sheds 5.9% this week, as yearly returns fall more in line with earnings growth

Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Shennan Circuit Company Limited (SZSE:002916) share price has soared 121% in the last 1 year. Most would be very happy with that, especially in just one year! But it's down 5.9% in the last week. However, the stock hasn't done so well in the longer term, with the stock only up 6.8% in three years.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Shennan Circuit

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last year Shennan Circuit grew its earnings per share (EPS) by 45%. The share price gain of 121% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Shennan Circuit has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Shennan Circuit, it has a TSR of 123% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Shennan Circuit has rewarded shareholders with a total shareholder return of 123% in the last twelve months. That's including the dividend. Notably the five-year annualised TSR loss of 1.5% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Shennan Circuit is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.