Did You Participate In Any Of Te Chang Construction's (GTSM:5511) Respectable 90% Return?

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Te Chang Construction Co., Ltd. (GTSM:5511), which is up 55%, over three years, soundly beating the market return of 34% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 9.9% in the last year , including dividends .

Check out our latest analysis for Te Chang Construction

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Te Chang Construction was able to grow its EPS at 5.7% per year over three years, sending the share price higher. In comparison, the 16% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Te Chang Construction, it has a TSR of 90% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Te Chang Construction shareholders gained a total return of 9.9% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Te Chang Construction better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Te Chang Construction you should be aware of.

Of course Te Chang Construction 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 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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