The one-year returns for Metallurgical Corporation of China's (HKG:1618) shareholders have been notable, yet its earnings growth was even better

By
Simply Wall St
Published
February 17, 2022
SEHK:1618
Source: Shutterstock

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Metallurgical Corporation of China Ltd. (HKG:1618) share price is 37% higher than it was a year ago, much better than the market decline of around 20% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 15% in three years.

The past week has proven to be lucrative for Metallurgical Corporation of China investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Metallurgical Corporation of China

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last year Metallurgical Corporation of China grew its earnings per share (EPS) by 51%. This EPS growth is significantly higher than the 37% increase in the share price. Therefore, it seems the market isn't as excited about Metallurgical Corporation of China as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 5.36.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
SEHK:1618 Earnings Per Share Growth February 17th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Metallurgical Corporation of China the TSR over the last 1 year was 43%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Metallurgical Corporation of China shareholders have received a total shareholder return of 43% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 1.0%. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Metallurgical Corporation of China that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies 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 HK exchanges.

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