One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the China National Complete Plant Import & Export Corporation Limited (SZSE:000151) share price is up 31% in the last three years, clearly besting the market decline of around 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 14%.
Although China National Complete Plant Import & Export has shed CN¥432m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for China National Complete Plant Import & Export
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.
Over the last three years, China National Complete Plant Import & Export failed to grow earnings per share, which fell 36% (annualized).
So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.
It could be that the revenue growth of 45% per year is viewed as evidence that China National Complete Plant Import & Export is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on China National Complete Plant Import & Export's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that China National Complete Plant Import & Export has rewarded shareholders with a total shareholder return of 14% in the last twelve months. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. 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 China National Complete Plant Import & Export better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with China National Complete Plant Import & Export .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.