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. For example, Baoxiniao Holding Co., Ltd. (SZSE:002154) shareholders have seen the share price rise 63% over three years, well in excess of the market decline (19%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 23% , including dividends .

Since it's been a strong week for Baoxiniao Holding shareholders, let's have a look at trend of the longer term fundamentals.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Baoxiniao Holding was able to grow its EPS at 22% per year over three years, sending the share price higher. The average annual share price increase of 18% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

We know that Baoxiniao Holding 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.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Baoxiniao Holding's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Baoxiniao Holding shareholders, and that cash payout contributed to why its TSR of 98%, over the last 3 years, is better than the share price return.

A Different Perspective

We're pleased to report that Baoxiniao Holding shareholders have received a total shareholder return of 23% over one year. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Baoxiniao Holding you should know about.

Of course Baoxiniao Holding may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.