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One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Qingdao Port International Co., Ltd. (HKG:6198) shareholders have seen the share price rise 38% over three years, well in excess of the market return (19%, not including dividends).
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...' 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).
During three years of share price growth, Qingdao Port International achieved compound earnings per share growth of 13% per year. We note that the 11% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
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 Qingdao Port International has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Qingdao Port International will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Qingdao Port International's TSR for the last 3 years was 62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Qingdao Port International shareholders can take comfort that, including dividends, their trailing twelve month loss of 1.9% wasn't as bad as the market loss of around -14%. Shareholders who have held for three years might be relatively sanguine about the recent weakness, given they have made 17% per year for three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. Before forming an opinion on Qingdao Port International you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: Qingdao Port International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.