Chongqing Fuling Electric Power Industrial (SHSE:600452) shareholders notch a 20% CAGR over 5 years, yet earnings have been shrinking

While Chongqing Fuling Electric Power Industrial Co., Ltd. (SHSE:600452) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 138% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

The past week has proven to be lucrative for Chongqing Fuling Electric Power Industrial investors, so let's see if fundamentals drove the company's five-year performance.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Chongqing Fuling Electric Power Industrial's earnings per share are down 2.2% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. 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.

The modest 1.0% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 6.4% per year is probably viewed as evidence that Chongqing Fuling Electric Power Industrial is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Chongqing Fuling Electric Power Industrial the TSR over the last 5 years was 152%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Chongqing Fuling Electric Power Industrial shareholders are up 10% for the year (even including dividends). Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 20% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Chongqing Fuling Electric Power Industrial better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Chongqing Fuling Electric Power Industrial .

We will like Chongqing Fuling Electric Power Industrial 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.