Johnson Health Tech .Co's (TWSE:1736) five-year earnings growth trails the favorable shareholder returns

The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Johnson Health Tech .Co., Ltd. (TWSE:1736) share price is 84% higher than it was five years ago, which is more than the market average. It's also good to see a healthy gain of 23% in the last year.

Since the stock has added NT$2.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Johnson Health Tech .Co

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 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).

During five years of share price growth, Johnson Health Tech .Co achieved compound earnings per share (EPS) growth of 13% per year. That makes the EPS growth particularly close to the yearly share price growth of 13%. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Johnson Health Tech .Co has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Johnson Health Tech .Co will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Johnson Health Tech .Co's TSR for the last 5 years was 95%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Johnson Health Tech .Co shareholders gained a total return of 24% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 14% 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. Take risks, for example - Johnson Health Tech .Co has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.