Tencent Music Entertainment Group's (NYSE:TME) one-year total shareholder returns outpace the underlying earnings growth

When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Tencent Music Entertainment Group (NYSE:TME). Its share price is already up an impressive 110% in the last twelve months. Then again, the 8.6% share price decline hasn't been so fun for shareholders. We note that the broader market is down 6.8% in the last month, and this may have impacted Tencent Music Entertainment Group's share price. Having said that, the longer term returns aren't so impressive, with stock gaining just 27% in three years.

In light of the stock dropping 6.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

See our latest analysis for Tencent Music Entertainment Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Tencent Music Entertainment Group was able to grow EPS by 25% in the last twelve months. This EPS growth is significantly lower than the 110% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Tencent Music Entertainment Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Tencent Music Entertainment Group will grow revenue in the future.

A Different Perspective

It's nice to see that Tencent Music Entertainment Group shareholders have received a total shareholder return of 112% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.6% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Is Tencent Music Entertainment Group cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Tencent Music Entertainment Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.