Nanjing Public Utilities Development (SZSE:000421) delivers shareholders notable 11% CAGR over 5 years, surging 10% in the last week alone

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Nanjing Public Utilities Development share price has climbed 56% in five years, easily topping the market decline of 0.3% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 14%, including dividends.

The past week has proven to be lucrative for Nanjing Public Utilities Development investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Nanjing Public Utilities Development

Nanjing Public Utilities Development wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Nanjing Public Utilities Development can boast revenue growth at a rate of 3.5% per year. Put simply, that growth rate fails to impress. The modest growth is probably broadly reflected in the share price, which is up 9%, per year over 5 years. We'd be looking for the underlying business to grow revenue a bit faster.

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

This free interactive report on Nanjing Public Utilities Development's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Nanjing Public Utilities Development's TSR for the last 5 years was 70%, 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 Nanjing Public Utilities Development has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Nanjing Public Utilities Development better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Nanjing Public Utilities Development (including 3 which don't sit too well with us) .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.