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For many, the main point of investing in the stock market is to achieve spectacular returns. When you find (and hold) a big winner, you can markedly improve your finances. For example, China Gold International Resources Corp. Ltd. (TSE:CGG) has generated a beautiful 797% return in just a single year. It's also good to see the share price up 17% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 8.4% in 90 days). And shareholders have also done well over the long term, with an increase of 61% in the last three years.
Anyone who held for that rewarding ride would probably be keen to talk about it.
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. 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.
China Gold International Resources went from making a loss to reporting a profit, in the last year.
We think the growth looks very prospective, so we're not surprised the market liked it too. Inflection points like this can be a great time to take a closer look at a company.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how China Gold International Resources has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at China Gold International Resources' financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered China Gold International Resources' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. China Gold International Resources hasn't been paying dividends, but its TSR of 834% exceeds its share price return of 797%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
It's good to see that China Gold International Resources has rewarded shareholders with a total shareholder return of 834% in the last twelve months. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve 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. Take risks, for example - China Gold International Resources has 2 warning signs we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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. 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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