Those who invested in Shenzhen Energy Group (SZSE:000027) five years ago are up 62%

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Shenzhen Energy Group share price has climbed 49% in five years, easily topping the market return of 9.9% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 13%, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Shenzhen Energy Group

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

Over half a decade, Shenzhen Energy Group managed to grow its earnings per share at 12% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. 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).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Shenzhen Energy Group, it has a TSR of 62% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Shenzhen Energy Group has rewarded shareholders with a total shareholder return of 13% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Shenzhen Energy Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Shenzhen Energy Group (of which 2 are potentially serious!) you should know about.

Of course Shenzhen Energy Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.