China State Construction Development Holdings' (HKG:830) earnings growth rate lags the 65% CAGR delivered to shareholders

The China State Construction Development Holdings Limited (HKG:830) share price has had a bad week, falling 11%. But over the last three years the stock has shone bright like a diamond. Over that time, we've been excited to watch the share price climb an impressive 308%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The thing to consider is whether there is still too much elation around the company's prospects.

While this past week has detracted from the company's three-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 China State Construction Development Holdings

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

During three years of share price growth, China State Construction Development Holdings achieved compound earnings per share growth of 43% per year. In comparison, the 60% 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. That's not necessarily surprising considering the three-year track record of earnings growth.

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

It is of course excellent to see how China State Construction Development Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling China State Construction Development Holdings stock, you should check out this FREE detailed report on its balance sheet.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for China State Construction Development Holdings the TSR over the last 3 years was 351%, 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 China State Construction Development Holdings has rewarded shareholders with a total shareholder return of 5.3% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 21% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Case in point: We've spotted 1 warning sign for China State Construction Development Holdings you should be aware of.

We will like China State Construction Development Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.