FinVolution Group (NYSE:FINV) sheds 7.7% this week, as yearly returns fall more in line with earnings growth
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the FinVolution Group (NYSE:FINV) share price is 134% higher than it was three years ago. That sort of return is as solid as granite. On top of that, the share price is up 34% in about a quarter.
Although FinVolution Group has shed US$129m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for FinVolution Group
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
FinVolution Group was able to grow its EPS at 8.4% per year over three years, sending the share price higher. In comparison, the 33% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into FinVolution Group's key metrics by checking this interactive graph of FinVolution Group'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, FinVolution Group's TSR for the last 3 years was 165%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that FinVolution Group shareholders have received a total shareholder return of 23% over the last year. Of course, that includes the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand FinVolution Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for FinVolution Group (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Of course FinVolution Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
