Is Zhou Hei Ya International Holdings' (HKG:1458) Share Price Gain Of 164% Well Earned?

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Zhou Hei Ya International Holdings Company Limited (HKG:1458) share price has soared 164% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 32% over the last quarter. But this could be related to the strong market, which is up 14% in the last three months. The longer term returns have not been as good, with the stock price only 27% higher than it was three years ago.

View our latest analysis for Zhou Hei Ya International Holdings

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last twelve months, Zhou Hei Ya International Holdings actually shrank its EPS by 67%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We are skeptical of the suggestion that the 1.1% dividend yield would entice buyers to the stock. Zhou Hei Ya International Holdings' revenue actually dropped 24% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Zhou Hei Ya International Holdings' TSR for the last year was 170%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Zhou Hei Ya International Holdings' total shareholder return last year was 170%. And yes, that does include the dividend. That gain actually surpasses the 11% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Zhou Hei Ya International Holdings on your watchlist. 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. Even so, be aware that Zhou Hei Ya International Holdings is showing 2 warning signs in our investment analysis , you should know about...

Zhou Hei Ya International Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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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. 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.
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