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When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Nanyang Holdings Limited (HKG:212) shareholders have enjoyed a 32% share price rise over the last half decade, well in excess of the market return of around -1.0% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.3% in the last year , including dividends .
See our latest analysis for Nanyang Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Nanyang Holdings's earnings per share are down 3.2% per year, despite strong share price performance over five years.
So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.
The revenue growth of 2.6% per year hardly seems impressive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Nanyang Holdings's financial health with this free 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Nanyang Holdings, it has a TSR of 48% for the last 5 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
Nanyang Holdings shareholders gained a total return of 1.3% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 8.2% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before deciding if you like the current share price, check how Nanyang Holdings scores on these 3 valuation metrics.