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If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Yangtzekiang Garment Limited (HKG:294) share price is 16% higher than it was a year ago, much better than the market return of around -7.7% in the same period. If it can keep that out-performance up over the long term, investors will do very well! Longer term, the stock is up 13% in three years.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year Yangtzekiang Garment grew its earnings per share (EPS) by 111%. This EPS growth is significantly higher than the 16% increase in the share price. Therefore, it seems the market isn’t as excited about Yangtzekiang Garment as it was before. This could be an opportunity.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Yangtzekiang Garment, it has a TSR of 21% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that Yangtzekiang Garment shareholders have received a total shareholder return of 21% over one year. That’s including the dividend. That gain is better than the annual TSR over five years, which is 5.5%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Yangtzekiang Garment is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing 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 HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.