Optimism for China Resources Gas Group (HKG:1193) has grown this past week, despite one-year decline in earnings

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the China Resources Gas Group Limited (HKG:1193) share price is up 47% in the last 1 year, clearly besting the market return of around 20% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 20% in three years.

Since it's been a strong week for China Resources Gas Group shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for China Resources Gas Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last twelve months, China Resources Gas Group actually shrank its EPS by 1.9%.

We don't think that the decline in earnings per share is a good measure of the business over the last twelve months. It makes sense to check some of the other fundamental data for an explanation of the share price rise.

However the year on year revenue growth of 11% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think China Resources Gas Group will earn in the future (free profit forecasts).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, China Resources Gas Group's TSR for the last 1 year was 54%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that China Resources Gas Group shareholders have received a total shareholder return of 54% over one year. That's including the dividend. That certainly beats the loss of about 3% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for China Resources Gas Group you should be aware of.

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.

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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.