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Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Shanghai Haohai Biological Technology Co., Ltd. (HKG:6826) share price. It's up 23% over three years, but that is below the market return. In the last year the stock price gained, albeit only 3.0%.
Check out our latest analysis for Shanghai Haohai Biological Technology
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During three years of share price growth, Shanghai Haohai Biological Technology achieved compound earnings per share growth of 12% per year. The average annual share price increase of 7.1% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Shanghai Haohai Biological Technology'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Shanghai Haohai Biological Technology, it has a TSR of 29% 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 Shanghai Haohai Biological Technology shareholders have gained 5.3% (in total) over the last year. That includes the value of the dividend. But the three year TSR of 8.9% per year is even better. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.