Is China Overseas Property Holdings’s (HKG:2669) 254% Share Price Increase Well Justified?

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For instance the China Overseas Property Holdings Limited (HKG:2669) share price is 254% higher than it was three years ago. How nice for those who held the stock! On top of that, the share price is up 14% in about a quarter.

Check out our latest analysis for China Overseas Property Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, China Overseas Property Holdings achieved compound earnings per share growth of 34% per year. This EPS growth is lower than the 52% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

You can see how EPS has changed over time in the image below.

SEHK:2669 Past and Future Earnings, December 9th 2019
SEHK:2669 Past and Future Earnings, December 9th 2019

We know that China Overseas Property Holdings has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling China Overseas Property Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Overseas Property Holdings the TSR over the last 3 years was 269%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Pleasingly, China Overseas Property Holdings’s total shareholder return last year was 118%. And yes, that does include the dividend. That’s better than the annualized TSR of 55% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Is China Overseas Property Holdings cheap compared to other companies? These 3 valuation measures might help you decide.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.