The China Chemical & Pharmaceutical (TPE:1701) Share Price Is Up 34% And Shareholders Are Holding On

On average, over time, stock markets tend to rise higher. This makes investing attractive. But not every stock you buy will perform as well as the overall market. For example, the China Chemical & Pharmaceutical Co., Ltd. (TPE:1701), share price is up over the last year, but its gain of 34% trails the market return. However, the stock hasn't done so well in the longer term, with the stock only up 18% in three years.

See our latest analysis for China Chemical & Pharmaceutical

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.

China Chemical & Pharmaceutical was able to grow EPS by 47% in the last twelve months. This EPS growth is significantly higher than the 34% increase in the share price. So it seems like the market has cooled on China Chemical & Pharmaceutical, despite the growth. Interesting.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into China Chemical & Pharmaceutical's key metrics by checking this interactive graph of China Chemical & Pharmaceutical's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of China Chemical & Pharmaceutical, it has a TSR of 38% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

China Chemical & Pharmaceutical provided a TSR of 38% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Even so, be aware that China Chemical & Pharmaceutical is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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