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). For example, the Piesat Information Technology Co., Ltd. (SHSE:688066) share price is up 73% in the last 1 year, clearly besting the market decline of around 15% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Piesat Information Technology hasn't been listed for long, so it's still not clear if it is a long term winner.

While the stock has fallen 3.5% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Piesat Information Technology

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 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.

Piesat Information Technology was able to grow EPS by 51% in the last twelve months. The share price gain of 73% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock. The fairly generous P/E ratio of 59.11 also points to this optimism.

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 Piesat Information Technology has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Piesat Information Technology's financial health with this free report on its balance sheet.

A Different Perspective

Piesat Information Technology shareholders should be happy with the total gain of 74% over the last twelve months, including dividends. We regret to report that the share price is down 2.1% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Piesat Information Technology (of which 1 is concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.