Is Huabao International Holdings' (HKG:336) Share Price Gain Of 300% Well Earned?

Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Huabao International Holdings Limited (HKG:336) share price has soared 300% in the last year. Most would be very happy with that, especially in just one year! Also pleasing for shareholders was the 54% gain in the last three months. Also impressive, the stock is up 104% over three years, making long term shareholders happy, too.

Check out our latest analysis for Huabao International Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year, Huabao International Holdings actually saw its earnings per share drop 49%.

Given the share price gain, we doubt the market is measuring progress with 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.

Huabao International Holdings' revenue actually dropped 6.5% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Huabao International Holdings' total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Huabao International Holdings shareholders, and that cash payout contributed to why its TSR of 317%, over the last year, is better than the share price return.

A Different Perspective

It's good to see that Huabao International Holdings has rewarded shareholders with a total shareholder return of 317% in the last twelve months. That's better than the annualised return of 39% 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. It's always interesting to track share price performance over the longer term. But to understand Huabao International Holdings better, we need to consider many other factors. Take risks, for example - Huabao International Holdings has 3 warning signs we think you should be aware of.

But note: Huabao International Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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