One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Sichuan Shudao Equipment & Technology Co.,Ltd. (SZSE:300540) shareholders have seen the share price rise 42% over three years, well in excess of the market decline (22%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.3%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder 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. 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).

During three years of share price growth, Sichuan Shudao Equipment & TechnologyLtd moved from a loss to profitability. So we would expect a higher share price over the period.

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

We know that Sichuan Shudao Equipment & TechnologyLtd has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

We're pleased to report that Sichuan Shudao Equipment & TechnologyLtd shareholders have received a total shareholder return of 5.3% over one year. Having said that, the five-year TSR of 6% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Sichuan Shudao Equipment & TechnologyLtd better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Sichuan Shudao Equipment & TechnologyLtd you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.