Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Hainan Mining Co., Ltd. (SHSE:601969) shareholders have enjoyed a 35% share price rise over the last half decade, well in excess of the market decline of around 2.7% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12% , including dividends .

The past week has proven to be lucrative for Hainan Mining investors, so let's see if fundamentals drove the company's five-year performance.

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 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 half decade, Hainan Mining became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Hainan Mining share price is up 22% in the last three years. During the same period, EPS grew by 65% each year. This EPS growth is higher than the 7% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

A Different Perspective

It's nice to see that Hainan Mining shareholders have received a total shareholder return of 12% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. 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 Hainan Mining better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Hainan Mining .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.