Ruentex Engineering & Construction's (TWSE:2597) five-year earnings growth trails the 46% YoY shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Ruentex Engineering & Construction Co., Ltd. (TWSE:2597) share price. It's 372% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. Meanwhile the share price is 4.5% higher than it was a week ago.

Since the stock has added NT$1.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Ruentex Engineering & Construction

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Over half a decade, Ruentex Engineering & Construction managed to grow its earnings per share at 33% a year. So the EPS growth rate is rather close to the annualized share price gain of 36% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

Dive deeper into Ruentex Engineering & Construction's key metrics by checking this interactive graph of Ruentex Engineering & Construction'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). 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. As it happens, Ruentex Engineering & Construction's TSR for the last 5 years was 555%, 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

We're pleased to report that Ruentex Engineering & Construction shareholders have received a total shareholder return of 89% over one year. And that does include the dividend. That's better than the annualised return of 46% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Ruentex Engineering & Construction better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Ruentex Engineering & Construction .

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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.