By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at China Shipbuilding Industry Group Power Co., Ltd. (SHSE:600482), which is up 13%, over three years, soundly beating the market decline of 36% (not including dividends).

In light of the stock dropping 7.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

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...' 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, China Shipbuilding Industry Group Power achieved compound earnings per share growth of 18% per year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that China Shipbuilding Industry Group Power has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's nice to see that China Shipbuilding Industry Group Power shareholders have received a total shareholder return of 12% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before forming an opinion on China Shipbuilding Industry Group Power you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.