U.S. Markets open in 5 hrs 58 mins

Can You Imagine How Chuffed Tencent Holdings's (HKG:700) Shareholders Feel About Its 200% Share Price Gain?

Simply Wall St

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Tencent Holdings Limited (HKG:700) which saw its share price drive 200% higher over five years.

View our latest analysis for Tencent Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over half a decade, Tencent Holdings managed to grow its earnings per share at 31% a year. The EPS growth is more impressive than the yearly share price gain of 25% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

SEHK:700 Past and Future Earnings, December 10th 2019

We know that Tencent Holdings has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Tencent Holdings's financial health with this free report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Tencent Holdings, it has a TSR of 204% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Tencent Holdings shareholders have received a total shareholder return of 9.5% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before spending more time on Tencent Holdings it might be wise to click here to see if insiders have been buying or selling shares.

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.

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.