The total return for Tianjin Chase Sun PharmaceuticalLtd (SZSE:300026) investors has risen faster than earnings growth over the last five years

Simply Wall St · 10/18 01:22

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Tianjin Chase Sun PharmaceuticalLtd share price has climbed 14% in five years, easily topping the market return of 11% (ignoring dividends).

While the stock has fallen 7.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Tianjin Chase Sun PharmaceuticalLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Tianjin Chase Sun PharmaceuticalLtd achieved compound earnings per share (EPS) growth of 7.2% per year. This EPS growth is higher than the 3% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

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

earnings-per-share-growth
SZSE:300026 Earnings Per Share Growth October 18th 2024

Dive deeper into Tianjin Chase Sun PharmaceuticalLtd's key metrics by checking this interactive graph of Tianjin Chase Sun PharmaceuticalLtd'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 Tianjin Chase Sun PharmaceuticalLtd the TSR over the last 5 years was 19%, 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

While the broader market gained around 1.4% in the last year, Tianjin Chase Sun PharmaceuticalLtd shareholders lost 9.6% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Tianjin Chase Sun PharmaceuticalLtd that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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