If You Had Bought China Grand Pharmaceutical and Healthcare Holdings (HKG:512) Shares Five Years Ago You'd Have Earned 332% Returns

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the China Grand Pharmaceutical and Healthcare Holdings Limited (HKG:512) share price has soared 332% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Meanwhile the share price is 2.9% higher than it was a week ago.

Check out our latest analysis for China Grand Pharmaceutical and Healthcare 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.

Over half a decade, China Grand Pharmaceutical and Healthcare Holdings managed to grow its earnings per share at 32% a year. This EPS growth is reasonably close to the 34% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on China Grand Pharmaceutical and Healthcare Holdings' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of China Grand Pharmaceutical and Healthcare Holdings, it has a TSR of 351% 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

China Grand Pharmaceutical and Healthcare Holdings shareholders are up 30% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 35% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand China Grand Pharmaceutical and Healthcare Holdings better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for China Grand Pharmaceutical and Healthcare Holdings you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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