Jinan Acetate Chemical's (TWSE:4763) three-year earnings growth trails the massive shareholder returns

Jinan Acetate Chemical Co., Ltd. (TWSE:4763) shareholders might be concerned after seeing the share price drop 12% in the last month. But over the last three years the stock has shone bright like a diamond. The longer term view reveals that the share price is up 787% in that period. So the recent fall doesn't do much to dampen our respect for the business. The thing to consider is whether there is still too much elation around the company's prospects. It really delights us to see such great share price performance for investors.

The past week has proven to be lucrative for Jinan Acetate Chemical investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Jinan Acetate Chemical

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During three years of share price growth, Jinan Acetate Chemical achieved compound earnings per share growth of 99% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 107% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Jinan Acetate Chemical's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Jinan Acetate Chemical's TSR for the last 3 years was 919%, 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

It's nice to see that Jinan Acetate Chemical shareholders have received a total shareholder return of 81% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 57%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Jinan Acetate Chemical , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.