We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Jiangsu Pacific Quartz Co., Ltd (SHSE:603688) shares for the last five years, while they gained 418%. If that doesn't get you thinking about long term investing, we don't know what will. It's also up 15% in about a month.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Over half a decade, Jiangsu Pacific Quartz managed to grow its earnings per share at 100% a year. The EPS growth is more impressive than the yearly share price gain of 39% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.16.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Jiangsu Pacific Quartz has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Jiangsu Pacific Quartz stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Jiangsu Pacific Quartz the TSR over the last 5 years was 446%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Jiangsu Pacific Quartz shareholders are down 39% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 19%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 40%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Jiangsu Pacific Quartz you should be aware of, and 1 of them is a bit unpleasant.
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.
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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.