Investors Who Bought Merida Industry (TPE:9914) Shares Three Years Ago Are Now Up 92%

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. For example, Merida Industry Co., Ltd. (TPE:9914) shareholders have seen the share price rise 92% over three years, well in excess of the market return (34%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 46% , including dividends .

See our latest analysis for Merida Industry

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 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.

Merida Industry was able to grow its EPS at 36% per year over three years, sending the share price higher. This EPS growth is higher than the 24% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

It is of course excellent to see how Merida Industry has grown profits over the years, but the future is more important for shareholders. This free interactive report on Merida 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Merida Industry's TSR for the last 3 years was 102%, 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 Merida Industry shareholders have received a total shareholder return of 46% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Merida Industry you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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