By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Henan Pinggao Electric Co.,Ltd. (SHSE:600312) shareholders have seen the share price rise 86% over three years, well in excess of the market decline (26%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 54% in the last year , including dividends .

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Henan Pinggao ElectricLtd

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Henan Pinggao ElectricLtd was able to grow its EPS at 37% per year over three years, sending the share price higher. This EPS growth is higher than the 23% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Henan Pinggao ElectricLtd has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Henan Pinggao ElectricLtd's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Henan Pinggao ElectricLtd the TSR over the last 3 years was 88%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Henan Pinggao ElectricLtd shareholders have received a total shareholder return of 54% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Henan Pinggao ElectricLtd you might want to consider these 3 valuation metrics.

But note: Henan Pinggao ElectricLtd may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.