Tong Yang Industry's (TWSE:1319) earnings growth rate lags the 42% CAGR delivered to shareholders

It hasn't been the best quarter for Tong Yang Industry Co., Ltd. (TWSE:1319) shareholders, since the share price has fallen 24% in that time. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. In fact, the share price is up a full 158% compared to three years ago. So the recent fall in the share price should be viewed in that context. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Tong Yang Industry

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 three years of share price growth, Tong Yang Industry achieved compound earnings per share growth of 75% per year. This EPS growth is higher than the 37% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

It is of course excellent to see how Tong Yang Industry has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Tong Yang Industry's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. 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 185%, 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 Tong Yang Industry shareholders have received a total shareholder return of 62% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 20% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 1 warning sign for Tong Yang Industry that you should be aware of.

For those who like to find winning investments this free list of undervalued 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com