Stock Analysis

Top Energy CompanyShanxi's (SHSE:600780) earnings growth rate lags the 10% CAGR delivered to shareholders

SHSE:600780
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Top Energy Company Ltd.Shanxi (SHSE:600780) shareholders might be concerned after seeing the share price drop 16% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 49% in that time. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 35% drop, in the last year.

Since the long term performance has been good but there's been a recent pullback of 7.5%, let's check if the fundamentals match the share price.

See our latest analysis for Top Energy CompanyShanxi

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 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 five years of share price growth, Top Energy CompanyShanxi achieved compound earnings per share (EPS) growth of 12% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 11.82 also suggests market apprehension.

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

earnings-per-share-growth
SHSE:600780 Earnings Per Share Growth January 6th 2025

This free interactive report on Top Energy CompanyShanxi'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 Top Energy CompanyShanxi, it has a TSR of 61% for the last 5 years. 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

Top Energy CompanyShanxi shareholders are down 32% for the year (even including dividends), but the market itself is up 6.1%. 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 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Top Energy CompanyShanxi better, we need to consider many other factors. For example, we've discovered 1 warning sign for Top Energy CompanyShanxi that you should be aware of before investing here.

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.

Valuation is complex, but we're here to simplify it.

Discover if Top Energy CompanyShanxi might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.