BYD Company Limited (HKG: 1211) Shareholders saw the share price drop 15% during the month. But over five years, the returns have been remarkably good. During this time, the share price climbed 552% higher! We can probably expect the recent fall after such a steep rise. Of course, what matters most is whether the business can improve sustainably, thus justifying a higher price. We love happy stories like this. The company should be really proud of this performance!

So let’s take a look and see if the long-term performance of the business has been in line with the progress of the underlying business.

See our latest analysis for BYD

While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying business performance. 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).

During five years of share price growth, BYD has seen its EPS drop 8.1% per year.

This means that the market is unlikely to judge the company based on earnings growth. Since the change in EPS doesn’t seem to correlate with the change in the stock price, it’s worth taking a look at other metrics.

We doubt the modest 0.07% dividend yield will attract many buyers to the stock. In contrast, revenue growth of 12% per year is probably seen as proof that BYD is growing, a real positive. It is entirely possible that management is prioritizing revenue growth over EPS growth at this time.

The graph below illustrates the evolution of earnings and income over time (reveal the exact values ​​by clicking on the image).

BYD is well known to investors, and many smart analysts have tried to predict future profit levels. If you are thinking of buying or selling BYD shares, you should check this out free report showing analysts’ consensus estimates for future earnings.

What about dividends?

In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spin-off. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. In the case of BYD, it has a TSR of 561% for the past 5 years. This exceeds its share price return that we mentioned earlier. This is largely the result of his dividend payments!

A different perspective

It’s nice to see that BYD shareholders have received a 38% total shareholder return over the past year. Of course, this includes the dividend. That said, the five-year TSR of 46% per year is even better. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example – BYD has 3 warning signs we think you should be aware.

But beware : BYD may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

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

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.