Investing in China Merchants Port Holdings (HKG:144) a year ago would have delivered you a 27% gain

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the China Merchants Port Holdings Company Limited (HKG:144) share price is 19% higher than it was a year ago, much better than the market decline of around 1.6% (not including dividends) in the same period. So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 3.3% in three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for China Merchants Port 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.

Over the last twelve months, China Merchants Port Holdings actually shrank its EPS by 19%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Absent any improvement, we don't think a thirst for dividends is pushing up the China Merchants Port Holdings' share price. Revenue actually dropped 4.6% over last year. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of China Merchants Port Holdings, it has a TSR of 27% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that China Merchants Port Holdings shareholders have received a total shareholder return of 27% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand China Merchants Port Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with China Merchants Port Holdings .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.