The total return for Tung Ho Textile (TWSE:1414) investors has risen faster than earnings growth over the last five years

It's been a soft week for Tung Ho Textile Co., Ltd. (TWSE:1414) shares, which are down 10%. But that doesn't change the fact that the returns over the last five years have been very strong. It's fair to say most would be happy with 236% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the long term performance has been good but there's been a recent pullback of 10%, let's check if the fundamentals match the share price.

See our latest analysis for Tung Ho Textile

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...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Tung Ho Textile achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is reasonably close to the 27% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Tung Ho Textile's key metrics by checking this interactive graph of Tung Ho Textile'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Tung Ho Textile the TSR over the last 5 years was 273%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Tung Ho Textile shareholders have received returns of 34% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 30% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Tung Ho Textile better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Tung Ho Textile you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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