Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Solomon Systech (International) Limited (HKG:2878) share price. It's 408% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's also up 38% in about a month.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
See our latest analysis for Solomon Systech (International)
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the last half decade, Solomon Systech (International) became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Solomon Systech (International)'s total shareholder return (TSR) and its 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. Solomon Systech (International)'s TSR of 422% for the 5 years exceeded its share price return, because it has paid dividends.
A Different Perspective
It's good to see that Solomon Systech (International) has rewarded shareholders with a total shareholder return of 158% in the last twelve months. That's better than the annualised return of 39% 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. 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. Even so, be aware that Solomon Systech (International) is showing 1 warning sign in our investment analysis , you should know about...
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong 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.