Despite lower earnings than five years ago, I-Hwa IndustrialLtd (TWSE:1456) investors are up 140% since then

The I-Hwa Industrial Co.,Ltd (TWSE:1456) share price has had a bad week, falling 10%. But in stark contrast, the returns over the last half decade have impressed. It's fair to say most would be happy with 121% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

While the stock has fallen 10% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for I-Hwa IndustrialLtd

Given that I-Hwa IndustrialLtd only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years I-Hwa IndustrialLtd saw its revenue grow at 14% per year. That's a fairly respectable growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 17% per year over in that time. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on I-Hwa IndustrialLtd's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between I-Hwa IndustrialLtd's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that I-Hwa IndustrialLtd's TSR, at 140% is higher than its share price return of 121%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

I-Hwa IndustrialLtd shareholders are up 23% for the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 19% per year over five year. This suggests the company might be improving over time. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for I-Hwa IndustrialLtd (of which 1 can't be ignored!) you should know about.

Of course I-Hwa IndustrialLtd 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 Taiwanese exchanges.

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

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.