China Unicom (Hong Kong) (HKG:762) shareholders have earned a 70% return over the last year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the China Unicom (Hong Kong) Limited (HKG:762) share price is up 60% in the last 1 year, clearly besting the market return of around 6.3% (not including dividends). That’s a solid performance by our standards! However, the stock hasn’t done so well in the longer term, with the stock only up 5.1% in three years.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

Check out our latest analysis for China Unicom (Hong Kong)

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.

China Unicom (Hong Kong) was able to grow EPS by 13% in the last twelve months. The share price gain of 60% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that China Unicom (Hong Kong) has improved its bottom line lately, but is it going to grow revenue? Check if analysts think China Unicom (Hong Kong) will grow revenue in the future.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of China Unicom (Hong Kong), it has a TSR of 70% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It’s nice to see that China Unicom (Hong Kong) shareholders have received a total shareholder return of 70% over the last year. That’s including the dividend. That certainly beats the loss of about 3% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 1 warning sign for China Unicom (Hong Kong) that you should be aware of.

But note: China Unicom (Hong Kong) 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.