Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the China Reinsurance (Group) Corporation (HKG:1508) share price is 65% higher than it was a year ago, much better than the market return of around 13% (not including dividends) in the same period. That's a solid performance by our standards! Zooming out, the stock is actually down 10% in the last three years.

The past week has proven to be lucrative for China Reinsurance (Group) 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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

China Reinsurance (Group) was able to grow EPS by 174% in the last twelve months. This EPS growth is significantly higher than the 65% increase in the share price. So it seems like the market has cooled on China Reinsurance (Group), despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 3.23.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of China Reinsurance (Group)'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). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Reinsurance (Group) the TSR over the last 1 year was 79%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that China Reinsurance (Group) has rewarded shareholders with a total shareholder return of 79% in the last twelve months. That's including the dividend. That certainly beats the loss of about 2% per year over the last half decade. 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 China Reinsurance (Group) better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with China Reinsurance (Group) (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 Hong Kong 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.