Investing in Nongfu Spring (HKG:9633) a year ago would have delivered you a 73% gain

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Nongfu Spring Co., Ltd. (HKG:9633) share price is 70% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 23% higher than it was three years ago.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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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.

Nongfu Spring was able to grow EPS by 7.7% in the last twelve months. The share price gain of 70% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Nongfu Spring's TSR for the last 1 year was 73%, 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 good to see that Nongfu Spring has rewarded shareholders with a total shareholder return of 73% in the last twelve months. That's including the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 Nongfu Spring , and understanding them should be part of your investment process.

Of course Nongfu Spring may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.