Dalian Huarui Heavy Industry Group's (SZSE:002204) earnings growth rate lags the 8.0% CAGR delivered to shareholders

Simply Wall St · 10/15 23:59

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Dalian Huarui Heavy Industry Group Co., LTD. (SZSE:002204) shareholders have enjoyed a 42% share price rise over the last half decade, well in excess of the market return of around 11% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.0% in the last year, including dividends.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Dalian Huarui Heavy Industry 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.

Over half a decade, Dalian Huarui Heavy Industry Group managed to grow its earnings per share at 37% a year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

earnings-per-share-growth
SZSE:002204 Earnings Per Share Growth October 15th 2024

It might be well worthwhile taking a look at our free report on Dalian Huarui Heavy Industry Group'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Dalian Huarui Heavy Industry Group the TSR over the last 5 years was 47%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Dalian Huarui Heavy Industry Group has rewarded shareholders with a total shareholder return of 3.0% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 8% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Dalian Huarui Heavy Industry Group better, we need to consider many other factors. Even so, be aware that Dalian Huarui Heavy Industry Group is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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