The 10% return this week takes Sin Heng Heavy Machinery's (SGX:BKA) shareholders five-year gains to 321%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Sin Heng Heavy Machinery Limited (SGX:BKA) stock is up an impressive 152% over the last five years. In more good news, the share price has risen 26% in thirty days.

The past week has proven to be lucrative for Sin Heng Heavy Machinery investors, so let's see if fundamentals drove the company's five-year performance.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last half decade, Sin Heng Heavy Machinery became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Sin Heng Heavy Machinery share price has gained 57% in three years. In the same period, EPS is up 20% per year. This EPS growth is higher than the 16% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Sin Heng Heavy Machinery's key metrics by checking this interactive graph of Sin Heng Heavy Machinery's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Sin Heng Heavy Machinery the TSR over the last 5 years was 321%, 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

It's good to see that Sin Heng Heavy Machinery has rewarded shareholders with a total shareholder return of 52% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 33%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 2 warning signs for Sin Heng Heavy Machinery you should be aware of.

Of course Sin Heng Heavy Machinery 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 Singaporean 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.