Time Interconnect Technology's (HKG:1729) earnings growth rate lags the 98% CAGR delivered to shareholders

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the Time Interconnect Technology Limited (HKG:1729) share price, which skyrocketed 620% over three years. Also pleasing for shareholders was the 85% gain in the last three months. It really delights us to see such great share price performance for investors.

While the stock has fallen 8.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Time Interconnect Technology

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During three years of share price growth, Time Interconnect Technology achieved compound earnings per share growth of 19% per year. In comparison, the 93% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. 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).

Dive deeper into Time Interconnect Technology's key metrics by checking this interactive graph of Time Interconnect Technology'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Time Interconnect Technology the TSR over the last 3 years was 675%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Time Interconnect Technology has rewarded shareholders with a total shareholder return of 112% in the last twelve months. And that does include the dividend. That's better than the annualised return of 45% 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. For example, we've discovered 1 warning sign for Time Interconnect Technology that you should be aware of before investing here.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com