The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Jiangsu General Science Technology Co., Ltd. (SHSE:601500) share price is 43% higher than it was a year ago, much better than the market return of around 1.2% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 23% higher than it was three years ago.

Since the stock has added CN¥1.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the last year Jiangsu General Science Technology saw its earnings per share (EPS) increase strongly. While that particular rate of growth is unlikely to be sustained for long, it is still remarkable. So we'd expect to see the share price higher. We're real advocates of letting inflection points like this guide our research as stock pickers.

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

It is of course excellent to see how Jiangsu General Science Technology has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Jiangsu General Science Technology stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Jiangsu General Science Technology shareholders have received a total shareholder return of 45% over one year. That's including the dividend. That's better than the annualised return of 2% over half a decade, implying that the company is doing better recently. 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 Jiangsu General Science Technology 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 Jiangsu General Science Technology (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

We will like Jiangsu General Science Technology better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.