China Tianrui Automotive Interiors (HKG:6162) jumps 17% this week, though earnings growth is still tracking behind one-year shareholder returns

By
Simply Wall St
Published
August 25, 2021
SEHK:6162
Source: Shutterstock

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example China Tianrui Automotive Interiors Co., LTD (HKG:6162). Its share price is already up an impressive 179% in the last twelve months. And in the last month, the share price has gained 133%. We'll need to follow China Tianrui Automotive Interiors for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for China Tianrui Automotive Interiors

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

China Tianrui Automotive Interiors was able to grow EPS by 13% in the last twelve months. This EPS growth is significantly lower than the 179% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

earnings-per-share-growth
SEHK:6162 Earnings Per Share Growth August 25th 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on China Tianrui Automotive Interiors' earnings, revenue and cash flow 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Tianrui Automotive Interiors, it has a TSR of 191% for the last 1 year. 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

China Tianrui Automotive Interiors boasts a total shareholder return of 191% for the last year (that includes the dividends) . A substantial portion of that gain has come in the last three months, with the stock up 129% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China Tianrui Automotive Interiors you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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