Tsingtao Brewery's (HKG:168) earnings growth rate lags the 12% CAGR delivered to shareholders

While Tsingtao Brewery Company Limited (HKG:168) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 24% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 65% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 34% decline over the last twelve months.

Although Tsingtao Brewery has shed HK$3.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Tsingtao Brewery

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, Tsingtao Brewery achieved compound earnings per share (EPS) growth of 24% per year. The EPS growth is more impressive than the yearly share price gain of 11% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Tsingtao Brewery'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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tsingtao Brewery's TSR for the last 5 years was 78%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 7.0% in the twelve months, Tsingtao Brewery shareholders did even worse, losing 32% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Tsingtao Brewery , and understanding them should be part of your investment process.

We will like Tsingtao Brewery 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.