Stella International Holdings (HKG:1836) stock performs better than its underlying earnings growth over last three years

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Stella International Holdings Limited (HKG:1836) share price is up 91% in the last three years, clearly besting the market decline of around 16% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 88%, including dividends.

The past week has proven to be lucrative for Stella International Holdings investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Stella International Holdings

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

Stella International Holdings was able to grow its EPS at 65% per year over three years, sending the share price higher. This EPS growth is higher than the 24% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 10.22 also reflects the negative sentiment around the stock.

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

We know that Stella International Holdings has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Stella International Holdings stock, you should check out this FREE detailed report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Stella International Holdings' TSR for the last 3 years was 162%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Stella International Holdings shareholders have received a total shareholder return of 88% over one year. That's including the dividend. That's better than the annualised return of 16% 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. It's always interesting to track share price performance over the longer term. But to understand Stella International Holdings better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Stella International Holdings you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.