Great Wall Motor Company Limited (HKG:2333) shareholders might be concerned after seeing the share price fall 23% in the last month. But that hardly detracts from the really solid long-term returns the company generates over five years. We think most investors would be happy with the 101% return over that period. In general, long-term returns give you a better idea of ​​business quality than short-term returns. The main question is whether stocks are too cheap or too expensive today. While returns over the past five years have been good, we feel sorry for shareholders who haven’t owned shares for very long, as the share price has fallen 52% in the past three years.

Although Great Wall Motor has lost HK$3.6 billion in market capitalization this week, let’s take a look at the longer-term fundamental trends and see if they have boosted returns.

Check out our latest analysis for Great Wall Motor

In his essay The super investors of Graham-and-Doddsville Warren Buffett described how stock prices do not always rationally reflect the value of a company. 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).

In half a decade, Great Wall Motor managed to grow its earnings per share by 23% per year. The earnings per share growth is more impressive than the annual price gain of 15% over the same period. So it seems like the market isn’t all that excited about the stock these days. This cautious sentiment is reflected in the (fairly low) price/earnings ratio of 8.81.

The company’s earnings per share (over time) are shown in the image below (click to see the exact numbers).

We know Great Wall Motor has improved its bottom line lately, but will sales increase? This free A report on analyst revenue forecasts should help you figure out whether EPS growth can be sustained.

What about dividends?

It’s important to consider the total shareholder return and share price return for any stock. The TSR is a return calculation that takes into account the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. For companies that pay a generous dividend, the TSR is often a lot higher than the share price return. Coincidentally, Great Wall Motor’s TSR for the last five years was 134%, which is higher than the share price return mentioned earlier. This is largely a result of the dividend payments!

a different perspective

It’s nice to see that Great Wall Motor shareholders have received a total shareholder return of 30% over the last year. And that includes the dividend. That’s better than the annualized return of 19% over half a decade, implying the company is doing better lately. At best, this could indicate real business momentum, implying this could be a good time to dig deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for example. Every company has them, and we’ve seen them 1 warning sign for Great Wall Motor you should know.

If you’re like me, you will too not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on Hong Kong stock exchanges.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

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