By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Tederic Machinery Co., LTD (SHSE:603289) share price is up 25% in the last three years, clearly besting the market decline of around 21% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 3.6% , including dividends .

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

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Tederic Machinery actually saw its earnings per share (EPS) drop 8.8% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Languishing at just 1.5%, we doubt the dividend is doing much to prop up the share price. It may well be that Tederic Machinery revenue growth rate of 8.0% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Tederic Machinery stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Tederic Machinery, it has a TSR of 33% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Tederic Machinery has rewarded shareholders with a total shareholder return of 3.6% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.6% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Tederic Machinery better, we need to consider many other factors. Take risks, for example - Tederic Machinery has 2 warning signs (and 1 which is concerning) we think you should know about.

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.