Ningxia Baofeng Energy Group's (SHSE:600989) five-year total shareholder returns outpace the underlying earnings growth

Simply Wall St · 10/18 06:56

It hasn't been the best quarter for Ningxia Baofeng Energy Group Co., Ltd. (SHSE:600989) shareholders, since the share price has fallen 12% in that time. On the bright side the returns have been quite good over the last half decade. After all, the share price is up a market-beating 56% in that time.

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.

Check out our latest analysis for Ningxia Baofeng Energy Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Ningxia Baofeng Energy Group achieved compound earnings per share (EPS) growth of 7.8% per year. This EPS growth is reasonably close to the 9% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

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

earnings-per-share-growth
SHSE:600989 Earnings Per Share Growth October 18th 2024

We know that Ningxia Baofeng Energy Group has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Ningxia Baofeng Energy Group the TSR over the last 5 years was 77%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Ningxia Baofeng Energy Group shareholders have received a total shareholder return of 14% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Ningxia Baofeng Energy Group better, we need to consider many other factors. Even so, be aware that Ningxia Baofeng Energy Group is showing 2 warning signs in our investment analysis , you should know about...

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.