Xinyi Solar Holdings (HKG:968) jumps 9.3% this week, though earnings growth is still tracking behind five-year shareholder returns

Some Xinyi Solar Holdings Limited (HKG:968) shareholders are probably rather concerned to see the share price fall 30% over the last three months. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 226% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

Since the stock has added HK$6.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Xinyi Solar Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Xinyi Solar Holdings achieved compound earnings per share (EPS) growth of 6.2% per year. This EPS growth is lower than the 27% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

It might be well worthwhile taking a look at our free report on Xinyi Solar Holdings' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Xinyi Solar Holdings the TSR over the last 5 years was 279%, 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

While the broader market lost about 28% in the twelve months, Xinyi Solar Holdings shareholders did even worse, losing 36% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 31% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Xinyi Solar Holdings better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Xinyi Solar Holdings you should be aware of.

We will like Xinyi Solar Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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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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.