By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Shenzhen Batian Ecotypic Engineering Co., Ltd. (SZSE:002170), which is up 36%, over three years, soundly beating the market decline of 17% (not including dividends).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Shenzhen Batian Ecotypic Engineering was able to grow its EPS at 60% per year over three years, sending the share price higher. The average annual share price increase of 11% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Shenzhen Batian Ecotypic Engineering's key metrics by checking this interactive graph of Shenzhen Batian Ecotypic Engineering's earnings, revenue and cash flow.

A Different Perspective

Although it hurts that Shenzhen Batian Ecotypic Engineering returned a loss of 9.7% in the last twelve months, the broader market was actually worse, returning a loss of 13%. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Batian Ecotypic Engineering (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

We will like Shenzhen Batian Ecotypic Engineering better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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