Chongqing Rural Commercial Bank (HKG:3618) jumps 5.9% this week, though earnings growth is still tracking behind three-year shareholder returns

By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Chongqing Rural Commercial Bank Co., Ltd. (HKG:3618) share price is up 79% in the last three years, clearly besting the market return of around 9.3% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 82%, including dividends.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Chongqing Rural Commercial Bank

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Chongqing Rural Commercial Bank achieved compound earnings per share growth of 5.4% per year. This EPS growth is lower than the 21% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

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. Dive deeper into the earnings by checking this interactive graph of Chongqing Rural Commercial Bank's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Chongqing Rural Commercial Bank's TSR for the last 3 years was 153%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Chongqing Rural Commercial Bank shareholders have received a total shareholder return of 82% over one year. That's including the dividend. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Keeping this in mind, a solid next step might be to take a look at Chongqing Rural Commercial Bank's dividend track record. This free interactive graph is a great place to start.

Of course Chongqing Rural Commercial Bank 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 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.