Tong Yang Industry (TWSE:1319) stock performs better than its underlying earnings growth over last three years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For example, the Tong Yang Industry Co., Ltd. (TWSE:1319) share price has soared 256% in the last three years. Most would be happy with that. On top of that, the share price is up 23% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Since the stock has added NT$4.4b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Tong Yang Industry

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Tong Yang Industry achieved compound earnings per share growth of 78% per year. This EPS growth is higher than the 53% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

We know that Tong Yang Industry has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Tong Yang Industry's balance sheet strength is a great place to start, if you want to investigate the stock further.

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. As it happens, Tong Yang Industry's TSR for the last 3 years was 292%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Tong Yang Industry shareholders have received a total shareholder return of 58% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 25%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Tong Yang Industry better, we need to consider many other factors. For example, we've discovered 1 warning sign for Tong Yang Industry that you should be aware of before investing here.

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 Taiwanese 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.