Charmacy Pharmaceutical (HKG:2289) stock outperforms underlying earnings growth over past year

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These days, it’s easy to just buy an index fund, and your returns should (roughly) match the market. But you can do better than that by picking better-than-average stocks (as part of a diversified portfolio). For example, the Charmacy Pharmaceutical Co., Ltd. (HKG:2289) the stock price is up 52% ​​over the past year, clearly outpacing the market decline of around 19% (excluding dividends). That’s a solid performance by our standards! Zooming out, the stock is actually down 11% over the last three years.

After a strong gain last week, it’s worth seeing if longer-term returns have been driven by improving fundamentals.

See our latest analysis for Charmacy Pharmaceutical

In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Charmacy Pharmaceutical was able to increase EPS by 24% over the last twelve months. The 52% share price gain certainly outpaced the EPS growth. This indicates that the market is now more bullish on the stock.

You can see below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

SEHK: 2289 Earnings per share growth February 18, 2022

We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. Before buying or selling a stock, we always recommend careful consideration of historical growth trends, available here.

What about dividends?

In addition to measuring share price performance, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, on the basis of the assumption that dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. In the case of Charmacy Pharmaceutical, it has a TSR of 59% for the last 1 year. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

It’s good to see that Charmacy Pharmaceutical shareholders have received a total shareholder return of 59% over the past year. Of course, this includes the dividend. This gain is better than the five-year annual TSR, which is 1.1%. Therefore, it seems that the sentiment around the company has been positive lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Example: we have identified 4 warning signs for Charmacy Pharmaceutical you should be aware of, and 2 of them are potentially serious.

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

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

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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