The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Zhongguancun Science-Tech Leasing Co., Ltd. (HKG:1601) share price is up 18% in the last 1 year, clearly besting the market return of around 12% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Zhongguancun Science-Tech Leasing hasn’t been listed for long, so it’s still not clear if it is a long term winner.
On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.
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.
Zhongguancun Science-Tech Leasing was able to grow EPS by 9.4% in the last twelve months. The share price gain of 18% certainly outpaced the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Zhongguancun Science-Tech Leasing the TSR over the last 1 year was 24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Zhongguancun Science-Tech Leasing boasts a total shareholder return of 24% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 8.2% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. 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. To that end, you should learn about the 2 warning signs we’ve spotted with Zhongguancun Science-Tech Leasing (including 1 which is potentially serious) .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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