Chung Hwa Pulp (TWSE:1905) delivers shareholders impressive 20% CAGR over 5 years, surging 8.4% in the last week alone

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Chung Hwa Pulp Corporation (TWSE:1905) share price has soared 139% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 15%.

Since the stock has added NT$1.8b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Chung Hwa Pulp

Given that Chung Hwa Pulp didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, Chung Hwa Pulp can boast revenue growth at a rate of 1.7% per year. That's not a very high growth rate considering the bottom line. In comparison, the share price rise of 19% per year over the last half a decade is pretty impressive. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. Some might suggest that the sentiment around the stock is rather positive.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Chung Hwa Pulp's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Chung Hwa Pulp's TSR for the last 5 years was 148%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Chung Hwa Pulp shareholders are down 2.7% for the year (even including dividends), but the market itself is up 42%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 20%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should be aware of the 2 warning signs we've spotted with Chung Hwa Pulp .

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.