Introducing FSE Services Group (HKG:331), A Stock That Climbed 48% In The Last Three Years

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at FSE Services Group Limited (HKG:331), which is up 48%, over three years, soundly beating the market return of 1.5% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 14% , including dividends .

View our latest analysis for FSE Services Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, FSE Services Group achieved compound earnings per share growth of 9.0% per year. In comparison, the 14% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on FSE Services Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of FSE Services Group, it has a TSR of 80% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Pleasingly, FSE Services Group's total shareholder return last year was 14%. And yes, that does include the dividend. The TSR has been even better over three years, coming in at 22% per year. 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. Take risks, for example - FSE Services Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

But note: FSE Services Group 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 HK exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.