Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Hangzhou Binjiang Real Estate Group Co.,Ltd (SZSE:002244) shareholders have enjoyed a 87% share price rise over the last half decade, well in excess of the market return of around 4.9% (not including dividends).
So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.
See our latest analysis for Hangzhou Binjiang Real Estate GroupLtd
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, Hangzhou Binjiang Real Estate GroupLtd achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is remarkably close to the 13% average annual increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Hangzhou Binjiang Real Estate GroupLtd the TSR over the last 5 years was 112%, 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 it’s never nice to take a loss, Hangzhou Binjiang Real Estate GroupLtd shareholders can take comfort that , including dividends,their trailing twelve month loss of 9.8% wasn’t as bad as the market loss of around 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 16% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Case in point: We’ve spotted 4 warning signs for Hangzhou Binjiang Real Estate GroupLtd 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.
Valuation is complex, but we’re helping make it simple.
Find out whether Hangzhou Binjiang Real Estate GroupLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Valuation is complex, but we’re helping make it simple.
Find out whether Hangzhou Binjiang Real Estate GroupLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com