Earnings grew faster than the splendid 16% CAGR delivered to Shenzhen Batian Ecotypic Engineering (SZSE:002170) shareholders over the last five years

Simply Wall St · 10/16 02:25

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Shenzhen Batian Ecotypic Engineering Co., Ltd. (SZSE:002170) which saw its share price drive 101% higher over five years. It's also good to see the share price up 13% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).

Although Shenzhen Batian Ecotypic Engineering has shed CN¥633m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Shenzhen Batian Ecotypic Engineering

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, Shenzhen Batian Ecotypic Engineering achieved compound earnings per share (EPS) growth of 148% per year. This EPS growth is higher than the 15% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

earnings-per-share-growth
SZSE:002170 Earnings Per Share Growth October 16th 2024

We know that Shenzhen Batian Ecotypic Engineering 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 Shenzhen Batian Ecotypic Engineering stock, you should check out this FREE detailed report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Shenzhen Batian Ecotypic Engineering the TSR over the last 5 years was 108%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Shenzhen Batian Ecotypic Engineering shareholders have received a total shareholder return of 20% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. 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 Shenzhen Batian Ecotypic Engineering better, we need to consider many other factors. Take risks, for example - Shenzhen Batian Ecotypic Engineering has 2 warning signs (and 1 which is concerning) we think you should know about.

We will like Shenzhen Batian Ecotypic Engineering better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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