The total return for United Laboratories International Holdings (HKG:3933) investors has risen faster than earnings growth over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of The United Laboratories International Holdings Limited (HKG:3933) stock is up an impressive 129% over the last five years. On top of that, the share price is up 25% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Since the long term performance has been good but there's been a recent pullback of 7.3%, let's check if the fundamentals match the share price.

View our latest analysis for United Laboratories International Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, United Laboratories International Holdings achieved compound earnings per share (EPS) growth of 24% per year. The EPS growth is more impressive than the yearly share price gain of 18% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.81.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how United Laboratories International Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at United Laboratories International Holdings' 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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of United Laboratories International Holdings, it has a TSR of 181% 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 United Laboratories International Holdings has rewarded shareholders with a total shareholder return of 32% in the last twelve months. That's including the dividend. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for United Laboratories International Holdings you should know about.

But note: United Laboratories 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 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.