Can You Imagine How CPMC Holdings' (HKG:906) Shareholders Feel About The 56% Share Price Increase?

By
Simply Wall St
Published
June 02, 2021
SEHK:906
Source: Shutterstock

Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the CPMC Holdings Limited (HKG:906) share price is up 56% in the last year, clearly besting the market return of around 28% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 10% lower than it was three years ago.

View our latest analysis for CPMC 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...' 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.

CPMC Holdings was able to grow EPS by 33% in the last twelve months. This EPS growth is significantly lower than the 56% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
SEHK:906 Earnings Per Share Growth June 3rd 2021

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on CPMC Holdings' 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CPMC Holdings' TSR for the last year was 73%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that CPMC Holdings shareholders have received a total shareholder return of 73% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for CPMC Holdings you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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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