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By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at CIMC Enric Holdings Limited (HKG:3899), which is up 99%, over three years, soundly beating the market return of 31% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 13%, including dividends.
Check out our latest analysis for CIMC Enric Holdings
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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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 three years of share price growth, CIMC Enric Holdings achieved compound earnings per share growth of 15% per year. This EPS growth is lower than the 26% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CIMC Enric Holdings, it has a TSR of 107% 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 nice to see that CIMC Enric Holdings shareholders have received a total shareholder return of 13% over the last year. And that does include the dividend. Notably the five-year annualised TSR loss of 5.2% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.