Investors more bullish on Chyang Sheng Dyeing & Finishing (TWSE:1463) this week as stock pops 13%, despite earnings trending downwards over past five years

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Chyang Sheng Dyeing & Finishing Co., Ltd. (TWSE:1463) has fallen short of that second goal, with a share price rise of 99% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 77% share price gain over twelve months.

Since it's been a strong week for Chyang Sheng Dyeing & Finishing shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Chyang Sheng Dyeing & Finishing

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Chyang Sheng Dyeing & Finishing actually saw its EPS drop 15% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 1.9% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 11% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Chyang Sheng Dyeing & Finishing, it has a TSR of 126% for the last 5 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

It's good to see that Chyang Sheng Dyeing & Finishing has rewarded shareholders with a total shareholder return of 77% in the last twelve months. And that does include the dividend. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Chyang Sheng Dyeing & Finishing better, we need to consider many other factors. For example, we've discovered 3 warning signs for Chyang Sheng Dyeing & Finishing (2 are potentially serious!) that you should be aware of before investing here.

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.