The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Shanxi Huaxiang Group Co., Ltd. (SHSE:603112) share price is 59% higher than it was a year ago, much better than the market decline of around 12% (not including dividends) in the same period. That's a solid performance by our standards! Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Shanxi Huaxiang Group

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

Shanxi Huaxiang Group was able to grow EPS by 21% in the last twelve months. This EPS growth is significantly lower than the 59% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

Dive deeper into Shanxi Huaxiang Group's key metrics by checking this interactive graph of Shanxi Huaxiang Group's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Shanxi Huaxiang Group's TSR for the last 1 year was 62%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Shanxi Huaxiang Group boasts a total shareholder return of 62% for the last year (that includes the dividends) . That's better than the more recent three month gain of 7.6%, implying that share price has plateaued recently. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). It's always interesting to track share price performance over the longer term. But to understand Shanxi Huaxiang Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shanxi Huaxiang Group (of which 1 is potentially serious!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CN 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.