Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Nanjing Kangni Mechanical & Electrical Co.,Ltd (SHSE:603111) share price is up 10% in the last 1 year, clearly besting the market decline of around 22% (not including dividends). That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 3.5% in three years.

Since the stock has added CN¥800m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Nanjing Kangni Mechanical & ElectricalLtd grew its earnings per share (EPS) by 37%. This EPS growth is significantly higher than the 10% increase in the share price. Therefore, it seems the market isn't as excited about Nanjing Kangni Mechanical & ElectricalLtd as it was before. This could be an opportunity.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Nanjing Kangni Mechanical & ElectricalLtd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Nanjing Kangni Mechanical & ElectricalLtd shareholders have received a total shareholder return of 10% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.1% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Is Nanjing Kangni Mechanical & ElectricalLtd cheap compared to other companies? These 3 valuation measures might help you decide.

We will like Nanjing Kangni Mechanical & ElectricalLtd better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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.