Everlight Electronics' (TWSE:2393) 28% CAGR outpaced the company's earnings growth over the same five-year period

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. 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 Everlight Electronics Co., Ltd. (TWSE:2393) share price has soared 162% in the last half decade. Most would be very happy with that. It's also good to see the share price up 43% over the last quarter.

Since the stock has added NT$1.7b 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 Everlight Electronics

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Everlight Electronics managed to grow its earnings per share at 18% a year. So the EPS growth rate is rather close to the annualized share price gain of 21% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

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

We know that Everlight Electronics has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 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. In the case of Everlight Electronics, it has a TSR of 244% for the last 5 years. 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

We're pleased to report that Everlight Electronics shareholders have received a total shareholder return of 60% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 28% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Everlight Electronics better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Everlight Electronics you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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