Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners.
But when you hold the right stock for the right time period, the rewards can be truly huge.
One bright shining star stock has been China MeiDong Auto Holdings Limited (HKG:1268), which is 314% higher than three years ago.
Also pleasing for shareholders was the 20% gain in the last three months.
But this move may well have been assisted by the reasonably buoyant market (up 10.0% in 90 days).
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.
China MeiDong Auto Holdings was able to grow its EPS at 49% per year over three years, sending the share price higher.
We note that the 61% yearly (average) share price gain isn’t too far from the EPS growth rate. Coincidence? Probably not.
That suggests that the market sentiment around the company hasn’t changed much over that time.
Au contraire, the share price change has arguably mimicked the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how China MeiDong Auto Holdings has grown profits over the years, but the future is more important for shareholders.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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.
Arguably, the TSR gives a more comprehensive picture of the return generated by a stock.
In the case of China MeiDong Auto Holdings, it has a TSR of 384% for the last 3 years. That exceeds its share price return that we previously mentioned.
The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s good to see that China MeiDong Auto Holdings has rewarded shareholders with a total shareholder return of 22% in the last twelve months.
And that does include the dividend.
Having said that, the five-year TSR of 24% a year, is even better.
Before forming an opinion on China MeiDong Auto Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course China MeiDong Auto Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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