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If You Had Bought Weichai Power (HKG:2338) Stock Three Years Ago, You Could Pocket A 153% Gain Today

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Simply Wall St
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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. To wit, the Weichai Power Co., Ltd. (HKG:2338) share price has flown 153% in the last three years. Most would be happy with that. Also pleasing for shareholders was the 37% gain in the last three months.

See our latest analysis for Weichai Power

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 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).

Weichai Power was able to grow its EPS at 73% per year over three years, sending the share price higher. This EPS growth is higher than the 36% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.82.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

SEHK:2338 Past and Future Earnings, January 10th 2020
SEHK:2338 Past and Future Earnings, January 10th 2020

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Weichai Power'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Weichai Power the TSR over the last 3 years was 187%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Weichai Power has rewarded shareholders with a total shareholder return of 88% in the last twelve months. And that does include the dividend. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Weichai Power you might want to consider these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.