China Development Financial Holding (TWSE:2883) shareholders have earned a 16% CAGR over the last five years

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But China Development Financial Holding Corporation (TWSE:2883) has fallen short of that second goal, with a share price rise of 73% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 25% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for China Development Financial Holding

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.

Over half a decade, China Development Financial Holding managed to grow its earnings per share at 18% a year. This EPS growth is higher than the 12% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that China Development Financial Holding has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, China Development Financial Holding's TSR for the last 5 years was 113%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

China Development Financial Holding provided a TSR of 30% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade 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 - China Development Financial Holding has 2 warning signs we think you should be aware of.

But note: China Development Financial Holding may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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