China Medical System Holdings (HKG:867) sheds 3.6% this week, as yearly returns fall more in line with earnings growth

It hasn't been the best quarter for China Medical System Holdings Limited (HKG:867) shareholders, since the share price has fallen 17% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 53% has certainly bested the market return!

Since the long term performance has been good but there's been a recent pullback of 3.6%, let's check if the fundamentals match the share price.

See our latest analysis for China Medical System Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, China Medical System Holdings achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is higher than the 9% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.20.

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

This free interactive report on China Medical System 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. In the case of China Medical System Holdings, it has a TSR of 92% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that China Medical System Holdings has rewarded shareholders with a total shareholder return of 2.1% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 14% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Keeping this in mind, a solid next step might be to take a look at China Medical System Holdings' dividend track record. This free interactive graph is a great place to start.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.