HangZhou Everfine Photo-e-info's (SZSE:300306) earnings growth rate lags the 6.5% CAGR delivered to shareholders

HangZhou Everfine Photo-e-info Co., Ltd. (SZSE:300306) shareholders might be concerned after seeing the share price drop 11% in the last week. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 12% in that time.

Since the long term performance has been good but there's been a recent pullback of 11%, let's check if the fundamentals match the share price.

Check out our latest analysis for HangZhou Everfine Photo-e-info

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 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.

HangZhou Everfine Photo-e-info was able to grow its EPS at 7.0% per year over three years, sending the share price higher. This EPS growth is higher than the 4% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, HangZhou Everfine Photo-e-info's TSR for the last 3 years was 21%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 6.2% in the last year, HangZhou Everfine Photo-e-info shareholders lost 5.3% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 2 warning signs for HangZhou Everfine Photo-e-info you should be aware of.

We will like HangZhou Everfine Photo-e-info better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.