By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at China Shipbuilding Industry Group Power Co., Ltd. (SHSE:600482), which is up 19%, over three years, soundly beating the market decline of 20% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.6%, including dividends.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 Shipbuilding Industry Group Power was able to grow its EPS at 2.3% per year over three years, sending the share price higher. In comparison, the 6% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This optimism is also reflected in the fairly generous P/E ratio of 53.06.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that China Shipbuilding Industry Group Power has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's good to see that China Shipbuilding Industry Group Power has rewarded shareholders with a total shareholder return of 5.6% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 1.9% 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. Is China Shipbuilding Industry Group Power cheap compared to other companies? These 3 valuation measures might help you decide.

But note: China Shipbuilding Industry Group Power may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.