Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Meitu, Inc. (HKG:1357) share price is 51% higher than it was a year ago, much better than the market decline of around 9.1% (not including dividends) in the same period. So that should have shareholders smiling. It is also impressive that the stock is up 37% over three years, adding to the sense that it is a real winner.

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 markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Meitu grew its earnings per share (EPS) by 298%. This EPS growth is significantly higher than the 51% increase in the share price. Therefore, it seems the market isn't as excited about Meitu 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).

It is of course excellent to see how Meitu has grown profits over the years, but the future is more important for shareholders. This free interactive report on Meitu's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Meitu shareholders have received a total shareholder return of 53% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Meitu better, we need to consider many other factors. Even so, be aware that Meitu is showing 2 warning signs in our investment analysis , you should know about...

Of course Meitu may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.