It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the Jiangsu Dagang Co., Ltd. (SZSE:002077) share price has soared 175% in the last three years. That sort of return is as solid as granite. In more good news, the share price has risen 10% in thirty days. But this could be related to good market conditions -- stocks in its market are up 9.1% in the last month.

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

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Jiangsu Dagang became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While it's never nice to take a loss, Jiangsu Dagang shareholders can take comfort that their trailing twelve month loss of 9.3% wasn't as bad as the market loss of around 12%. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. Is Jiangsu Dagang cheap compared to other companies? These 3 valuation measures might help you decide.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.