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 Suzhou Anjie Technology Co., Ltd. (SZSE:002635) share price is up 15% in the last 1 year, clearly besting the market decline of around 14% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren't so impressive, with stock gaining just 5.2% in three years.

Since the stock has added CN¥482m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During the last year Suzhou Anjie Technology grew its earnings per share (EPS) by 60%. It's fair to say that the share price gain of 15% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Suzhou Anjie Technology as it was before. This could be an opportunity.

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

We know that Suzhou Anjie Technology has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's good to see that Suzhou Anjie Technology has rewarded shareholders with a total shareholder return of 17% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Suzhou Anjie Technology better, we need to consider many other factors. For instance, we've identified 1 warning sign for Suzhou Anjie Technology that you should be aware of.

We will like Suzhou Anjie Technology 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.