Luhai Holding (TPE:2115) Has Compensated Shareholders With A Respectable 61% Return On Their Investment

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Luhai Holding Corp. (TPE:2115) has fallen short of that second goal, with a share price rise of 34% over five years, which is below the market return. Looking at the last year alone, the stock is up 11%.

See our latest analysis for Luhai Holding

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, Luhai Holding achieved compound earnings per share (EPS) growth of 17% per year. This EPS growth is higher than the 6% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.23 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Luhai Holding has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Luhai Holding's TSR for the last 5 years was 61%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Luhai Holding shareholders are up 17% for the year (even including dividends). But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 10% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Luhai Holding (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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