For many, the main point of investing in the stock market is to achieve spectacular returns. And we’ve seen some truly amazing gains over the years. To wit, the E-Commodities Holdings Limited (HKG:1733) share price has soared 309% over five years. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 25%. But this could be related to good market conditions — stocks in its market are up 11% in the last month.
The past week has proven to be lucrative for E-Commodities Holdings investors, so let’s see if fundamentals drove the company’s five-year performance.
View our latest analysis for E-Commodities Holdings
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Over half a decade, E-Commodities Holdings managed to grow its earnings per share at 20% a year. This EPS growth is lower than the 33% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into E-Commodities Holdings’ key metrics by checking this interactive graph of E-Commodities Holdings’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. 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. As it happens, E-Commodities Holdings’ TSR for the last 5 years was 588%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s good to see that E-Commodities Holdings has rewarded shareholders with a total shareholder return of 39% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 47% per year, is even more impressive. 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. For instance, we’ve identified 2 warning signs for E-Commodities Holdings that you should be aware of.
Of course E-Commodities 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 Hong Kong exchanges.
Valuation is complex, but we’re helping make it simple.
Find out whether E-Commodities Holdings 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.
