China Wood Optimization (Holding) Limited (HKG:1885) shareholders have seen the share price descend 14% over the month. Looking further back, the stock has generated good profits over five years. It has returned a market beating 85% in that time.
Check out our latest analysis for China Wood Optimization (Holding)
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, China Wood Optimization (Holding) achieved compound earnings per share (EPS) growth of 0.9% per year. This EPS growth is slower than the share price growth of 13% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on China Wood Optimization (Holding)'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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for China Wood Optimization (Holding) the TSR over the last 5 years was 91%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
China Wood Optimization (Holding) shareholders are up 4.9% for the year (even including dividends) . But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 14% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Is China Wood Optimization (Holding) cheap compared to other companies? These 3 valuation measures might help you decide.