Jiangxi Hongcheng EnvironmentLtd's (SHSE:600461) 14% CAGR outpaced the company's earnings growth over the same five-year period

It hasn't been the best quarter for Jiangxi Hongcheng Environment Co.,Ltd. (SHSE:600461) shareholders, since the share price has fallen 23% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 52% in that time.

Since it's been a strong week for Jiangxi Hongcheng EnvironmentLtd shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Jiangxi Hongcheng EnvironmentLtd

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, Jiangxi Hongcheng EnvironmentLtd achieved compound earnings per share (EPS) growth of 10% per year. This EPS growth is reasonably close to the 9% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

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

This free interactive report on Jiangxi Hongcheng EnvironmentLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Jiangxi Hongcheng EnvironmentLtd, it has a TSR of 96% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Jiangxi Hongcheng EnvironmentLtd has rewarded shareholders with a total shareholder return of 8.2% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 14% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Take risks, for example - Jiangxi Hongcheng EnvironmentLtd has 3 warning signs (and 1 which is concerning) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.