Despite the downward trend in earnings at Zhonghang Electronic Measuring InstrumentsLtd (SZSE:300114) the stock grows 5.3%, bringing five-year gains to 543%

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. For example, the Zhonghang Electronic Measuring Instruments Co.,Ltd (SZSE:300114) share price is up a whopping 536% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. Better yet, the share price has risen 5.3% in the last week. We love happy stories like this one. The company should be really proud of that performance!

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Zhonghang Electronic Measuring InstrumentsLtd

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 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).

During the five years of share price growth, Zhonghang Electronic Measuring InstrumentsLtd moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Zhonghang Electronic Measuring InstrumentsLtd's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Zhonghang Electronic Measuring InstrumentsLtd's total shareholder return (TSR) and its share price change, which we've covered above. 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 Zhonghang Electronic Measuring InstrumentsLtd shareholders, and that cash payout contributed to why its TSR of 543%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Zhonghang Electronic Measuring InstrumentsLtd has rewarded shareholders with a total shareholder return of 86% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 45% 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. To that end, you should be aware of the 1 warning sign we've spotted with Zhonghang Electronic Measuring InstrumentsLtd .

Of course Zhonghang Electronic Measuring InstrumentsLtd 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.