Did You Miss Hengyuan Refining Company Berhad's (KLSE:HENGYUAN) 95% Share Price Gain?

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Hengyuan Refining Company Berhad (KLSE:HENGYUAN) share price is up 95% in the last 5 years, clearly besting the market decline of around 6.8% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 62%.

Check out our latest analysis for Hengyuan Refining Company Berhad

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).

During five years of share price growth, Hengyuan Refining Company Berhad actually saw its EPS drop 6.5% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

We doubt the modest 0.7% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 3.6% per year is probably viewed as evidence that Hengyuan Refining Company Berhad is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

It's nice to see that Hengyuan Refining Company Berhad shareholders have received a total shareholder return of 62% over the last year. That's including the dividend. That's better than the annualised return of 14% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Hengyuan Refining Company Berhad (1 shouldn't be ignored) that you should be aware of.

Of course Hengyuan Refining Company Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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. 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.
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