These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Zhejiang Medicine Co., Ltd. (SHSE:600216) share price is up 48% in the last 1 year, clearly besting the market decline of around 20% (not including dividends). So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 6.7% in three years.

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

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Zhejiang Medicine grew its earnings per share (EPS) by 6.9%. This EPS growth is significantly lower than the 48% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

Dive deeper into Zhejiang Medicine's key metrics by checking this interactive graph of Zhejiang Medicine's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Zhejiang Medicine the TSR over the last 1 year was 50%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Zhejiang Medicine shareholders have received a total shareholder return of 50% over one year. Of course, that includes 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. It's always interesting to track share price performance over the longer term. But to understand Zhejiang Medicine better, we need to consider many other factors. For instance, we've identified 3 warning signs for Zhejiang Medicine that you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.