By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the HeNan Splendor Science & Technology Co., Ltd. (SZSE:002296) share price is up 37% in the last three years, clearly besting the market decline of around 23% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.0% in the last year.

Since the stock has added CN¥738m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, HeNan Splendor Science & Technology achieved compound earnings per share growth of 23% per year. The average annual share price increase of 11% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on HeNan Splendor Science & Technology's earnings, revenue and cash flow.

A Different Perspective

It's nice to see that HeNan Splendor Science & Technology shareholders have received a total shareholder return of 8.0% over the last year. That's better than the annualised return of 6% 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 HeNan Splendor Science & Technology better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for HeNan Splendor Science & Technology you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.