The total return for Shantui Construction Machinery (SZSE:000680) investors has risen faster than earnings growth over the last five years

Simply Wall St · 10/15 22:14

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Shantui Construction Machinery Co., Ltd. (SZSE:000680) shareholders would be well aware of this, since the stock is up 116% in five years. It's also up 13% in about a month. But this could be related to good market conditions -- stocks in its market are up 22% in the last month.

Although Shantui Construction Machinery has shed CN¥1.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Shantui Construction Machinery

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).

During five years of share price growth, Shantui Construction Machinery achieved compound earnings per share (EPS) growth of 71% per year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

earnings-per-share-growth
SZSE:000680 Earnings Per Share Growth October 15th 2024

We know that Shantui Construction Machinery has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Shantui Construction Machinery stock, you should check out this FREE detailed 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. We note that for Shantui Construction Machinery the TSR over the last 5 years was 123%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Shantui Construction Machinery shareholders have received a total shareholder return of 50% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% 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. 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 1 warning sign we've spotted with Shantui Construction Machinery .

Of course Shantui Construction Machinery 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 Chinese exchanges.