Yue Da International Holdings' (HKG:629) 44% CAGR outpaced the company's earnings growth over the same three-year period

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. For instance the Yue Da International Holdings Limited (HKG:629) share price is 172% higher than it was three years ago. That sort of return is as solid as granite. And in the last month, the share price has gained 15%.

The past week has proven to be lucrative for Yue Da International Holdings investors, so let's see if fundamentals drove the company's three-year performance.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Yue Da International Holdings achieved compound earnings per share growth of 10% per year. In comparison, the 40% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Yue Da International Holdings the TSR over the last 3 years was 199%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Yue Da International Holdings has rewarded shareholders with a total shareholder return of 73% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Yue Da International Holdings better, we need to consider many other factors. Even so, be aware that Yue Da International Holdings is showing 2 warning signs in our investment analysis , you should know about...

But note: Yue Da International Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.