The total return for Tianneng Power International (HKG:819) investors has risen faster than earnings growth over the last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Tianneng Power International Limited (HKG:819) shareholders have enjoyed a 20% share price rise over the last half decade, well in excess of the market decline of around 12% (not including dividends).

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Tianneng Power International

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.

Over half a decade, Tianneng Power International managed to grow its earnings per share at 7.6% a year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 4.38 also suggests market apprehension.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Tianneng Power International's earnings, revenue and cash flow.

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 Tianneng Power International, it has a TSR of 55% 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

We're pleased to report that Tianneng Power International shareholders have received a total shareholder return of 30% over one year. And that does include the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Tianneng Power International (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

But note: Tianneng Power International 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 Hong Kong 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.