Xinjiang Xintai Natural Gas' (SHSE:603393) earnings growth rate lags the 21% CAGR delivered to shareholders

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Xinjiang Xintai Natural Gas Co., Ltd. (SHSE:603393) shareholders would be well aware of this, since the stock is up 131% in five years. On the other hand, the stock price has retraced 7.3% in the last week. But note that the broader market is down 0.6% since last week, and this may have impacted Xinjiang Xintai Natural Gas' share price.

Although Xinjiang Xintai Natural Gas has shed CN¥1.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Xinjiang Xintai Natural Gas

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Xinjiang Xintai Natural Gas achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is higher than the 18% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

It is of course excellent to see how Xinjiang Xintai Natural Gas has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Xinjiang Xintai Natural Gas stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Xinjiang Xintai Natural Gas' TSR for the last 5 years was 159%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Xinjiang Xintai Natural Gas has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. 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. Case in point: We've spotted 1 warning sign for Xinjiang Xintai Natural Gas you should be aware of.

But note: Xinjiang Xintai Natural Gas may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.