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Tongguan Gold Group (HKG:340) pulls back 5.4% this week, but still delivers shareholders enviable 55% CAGR over 5 years
Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. To wit, the Tongguan Gold Group Limited (HKG:340) share price has soared 784% over five years. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 34% over the last quarter. It really delights us to see such great share price performance for investors.
Although Tongguan Gold Group has shed HK$704m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last half decade, Tongguan Gold Group became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Tongguan Gold Group share price is up 697% in the last three years. During the same period, EPS grew by 54% each year. Notably, the EPS growth has been slower than the annualised share price gain of 100% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Tongguan Gold Group has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Tongguan Gold Group's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Tongguan Gold Group, it has a TSR of 789% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Tongguan Gold Group has rewarded shareholders with a total shareholder return of 518% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 55%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Tongguan Gold Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course Tongguan Gold Group 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.
Valuation is complex, but we're here to simplify it.
Discover if Tongguan Gold Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SEHK:340
Tongguan Gold Group
An investment holding company, engages in the exploration, mining, processing, smelting, and sale of gold and related products in China.
High growth potential with solid track record.
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