The three-year returns for High Fashion International's (HKG:608) shareholders have been favorable, yet its earnings growth was even better

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at High Fashion International Limited (HKG:608), which is up 17%, over three years, soundly beating the market decline of 35% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 17% , including dividends .

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for High Fashion International

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, High Fashion International achieved compound earnings per share growth of 71% per year. The average annual share price increase of 5% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.59.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on High Fashion International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, High Fashion International's TSR for the last 3 years was 41%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that High Fashion International shareholders have received a total shareholder return of 17% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock's performance has improved in recent times. 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 High Fashion International better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with High Fashion International , and understanding them should be part of your investment process.

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 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.