The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Eastern Communications Co.,Ltd. (SHSE:600776) which saw its share price drive 211% higher over five years. Meanwhile the share price is 3.4% higher than it was a week ago.
Since the stock has added CN¥502m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for Eastern CommunicationsLtd
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Eastern CommunicationsLtd achieved compound earnings per share (EPS) growth of 8.4% per year. This EPS growth is slower than the share price growth of 26% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 87.16.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Eastern CommunicationsLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Eastern CommunicationsLtd's TSR for the last 5 years was 216%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Eastern CommunicationsLtd shareholders have received a total shareholder return of 36% over one year. That's including the dividend. That's better than the annualised return of 26% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Eastern CommunicationsLtd you might want to consider these 3 valuation metrics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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.