Nine Dragons Paper (Holdings) (HKG:2689) Has Gifted Shareholders With A Fantastic 193% Total Return On Their Investment

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Nine Dragons Paper (Holdings) Limited (HKG:2689) stock is up an impressive 140% over the last five years. On top of that, the share price is up 11% in about a quarter. But this could be related to the strong market, which is up 11% in the last three months.

Check out our latest analysis for Nine Dragons Paper (Holdings)

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Nine Dragons Paper (Holdings) achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 19% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.46.

The image below shows how EPS has 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. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Nine Dragons Paper (Holdings)'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Nine Dragons Paper (Holdings)'s TSR for the last 5 years was 193%, 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 Nine Dragons Paper (Holdings) shareholders have received a total shareholder return of 41% over the last year. And that does include the dividend. That's better than the annualised return of 24% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Nine Dragons Paper (Holdings) better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Nine Dragons Paper (Holdings) you should be aware of.

Nine Dragons Paper (Holdings) 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.

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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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