Shareholders Of China Metal Products (TPE:1532) Must Be Happy With Their 63% Return

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But China Metal Products Co., Ltd. (TPE:1532) has fallen short of that second goal, with a share price rise of 24% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 4.1%.

View our latest analysis for China Metal Products

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, China Metal Products actually saw its EPS drop 26% per year.

Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. The falling EPS doesn't correlate with the climbing share price, so it's worth taking a look at other metrics.

The revenue reduction of 4.1% per year is not a positive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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

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. We note that for China Metal Products the TSR over the last 5 years was 63%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Metal Products shareholders are up 7.7% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 10% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand China Metal Products better, we need to consider many other factors. Take risks, for example - China Metal Products has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

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 TW exchanges.

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This article by Simply Wall St is general in nature. 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.
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